The Matching Principle Requires Businesses to Report Warranty Expense ________

question 59

Multiple Choice

The matching principle requires businesses to report Warranty Expense ________.

• A) in the same period that the company records the revenue related to that warranty
• B) in the period prior to which the company records the revenue related to that warranty
• C) in the period after the related revenue is recorded
• D) in the long-term assets section of the balance sheet

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Definitions:

Depreciation Expense

The allocated portion of the cost of a company's fixed assets that is written off each year, reflecting the asset's usage and wear and tear.

Insurance Premium

The amount paid periodically to an insurance company by policyholders for covering their risk.

Income Statement

The income statement is a financial document that reports a company's financial performance over a specific accounting period, detailing revenues, expenses, and net income.

Balance Sheet

A financial statement that displays a company's financial position at a specific point in time, including assets, liabilities, and shareholders' equity.