The Matching Principle States That

question 224

Multiple Choice

The matching principle states that

• A) expenses will be matched with revenues to determine net income for an accounting period.
• B) the costs of goods sold must match the total expenses of the firm.
• C) the firm needs to match the assets and liabilities in order to record the transaction in its journal.
• D) revenue recognition occurs before the earnings cycle is completed.
• E) the total receipts must match the expenditures for a given period of time.

---

Definitions:

Comparative Balance Sheets

Financial statements that present the assets, liabilities, and equity of an entity at different points in time for comparison.

Cash Flows

Represents the total amount of money being transferred into and out of a business, especially as affecting liquidity.

Consolidated

Combined into a single entity, typically referring to the financial statements of a group of companies acting as a single economic entity.

Financial Statements

Summarized records of a company's financial activities and condition, including the balance sheet, income statement, statement of cash flows, and statement of retained earnings.