The Basic Purpose of the Matching Principle Is to Allocate

question 105

Multiple Choice

The basic purpose of the matching principle is to allocate the cost of an asset to expense over the years in which the asset contributes to revenue.Current accounting practice does not strictly apply this principle to expenditures for:

• A)Natural resources.
• B)Research and development.
• C)Trademarks.
• D)Equipment.

Understand how to record the gain or loss on disposal of an asset in financial statements.

Identify and describe the concepts of accumulated depreciation and contra asset accounts.

Calculate depreciation expenses using units-of-production and other methods.

Distinguish between capital and revenue expenditures.

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Definitions:

Finance Charge

A fee representing the cost of credit, or the cost of borrowing, including interest and other charges.

Annual Effective Rate

The annual rate that reflects the compounding of interest, offering a true reflection of the financial product's profitability.

Monthly Compounded

Interest calculation method where interest is added to the principal balance every month, increasing the amount on which future interest is calculated.

Nominal Rate

The stated interest rate of an investment or loan, not including the effect of compound interest or inflation adjustments.