Which Inventory Method Generally Best Follows the Matching Principle

question 16

Multiple Choice

Which inventory method generally best follows the matching principle?

• A)Average-cost
• B)LIFO
• C)Whichever method is used for tax purposes
• D)FIFO

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Definitions:

Gross Method

An accounting method for recording purchases at the full invoice price without deducting any cash discounts.

Credit Terms

Conditions under which credit is extended by a lender to a borrower, including repayment schedule, interest rate, and due dates.

Gross Profit

The financial gain obtained by subtracting the cost of goods sold from the revenue generated from sales, excluding operating expenses.

Sales Discounts

Reductions in the price of goods or services offered by a seller to a buyer to encourage prompt payment.