Which of the Following Principles Requires That Warranty Expense Be

question 12

Multiple Choice

Which of the following principles requires that warranty expense be recorded in the period that revenue is recorded?

• A)Consistency principle
• B)Matching principle
• C)Materiality concept
• D)Profit recognition principle

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Definitions:

Periodic Inventory System

A periodic inventory system is a method of inventory valuation where a physical count of inventory is performed at specific intervals to determine the ending inventory balance and the cost of goods sold.

Accounts Payable

Liabilities or amounts owed by a company for goods or services that have been received but not yet paid for.

Periodic System

An inventory accounting system where goods are physically counted at the end of a specific period to determine the cost of goods sold and ending inventory.

Purchases Returns and Allowances

Refers to a reduction in the cost of purchases due to items being returned or allowances provided by the seller for damaged or unsatisfactory goods.