The matching principle requires that expenses be matched to revenue so that efforts are matched to accomplishments. Which of the following reflects proper matching? a. Cost of goods sold is recorded when a sale is made. b. A patent is recorded as an asset at the time of purchase from an inventor. c. Construction of a building is completed on October 1 and depreciation is taken for the full calendar year (calendar year is the fiscal year). d. A loss on sale of an investment is allocated

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Business

Bradley Larsen

11 October, 09:36

The matching principle requires that expenses be matched to revenue so that efforts are matched to accomplishments. Which of the following reflects proper matching? a. Cost of goods sold is recorded when a sale is made. b. A patent is recorded as an asset at the time of purchase from an inventor. c. Construction of a building is completed on October 1 and depreciation is taken for the full calendar year (calendar year is the fiscal year). d. A loss on sale of an investment is allocated

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Ryder Leon · Answer 1

a. Cost of goods sold is recorded when a sale is made

Explanation:

The matching principle states that revenues of a period should be matched with the costs related to earning that revenue in the same period. As per the concept, the expenses should be recorded when a corresponding revenue that relates to those expenses is earned and not on the basis of when such expenses are incurred.

The concept also emphasizes upon recording expenses on systematic and prudent basis i. e consistently recording expenses which have been actually incurred and not recording in excess.

When a sale is effected and revenue received, the cost of such sales being immediately recorded is an example of application of matching principle.