Which accounting principle requires that expenses be recorded in the same period as the revenues they help to generate?
Understand the Problem
The question is asking about a specific accounting principle that dictates when expenses should be recognized in relation to revenues. This relates to fundamental accounting concepts.
Answer
The Matching Principle.
The accounting principle that requires that expenses be recorded in the same period as the revenues they help to generate is the Matching Principle.
Answer for screen readers
The accounting principle that requires that expenses be recorded in the same period as the revenues they help to generate is the Matching Principle.
More Information
The Matching Principle is a fundamental component of the Generally Accepted Accounting Principles (GAAP) that ensures the financial statements reflect the true performance of a business by aligning related revenues and expenses accurately over specific accounting periods.
Tips
A common mistake is confusing the matching principle with cash accounting, which records transactions when cash changes hands, rather than when they occur.
Sources
- What is Matching Principle - DOKKA Glossary - dokka.com
- Matching Principle in Accounting: Importance, Examples, and - Highradius - highradius.com
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