Question

The Matching Expenses with Revenue accounting concept is applied when the revenue earned and the expenses incurred to earn that revenue are reported in the same fiscal period.

Answer 1

The Matching Expenses with Revenue accounting concept states that expenses incurred to earn revenue should be reported in the same fiscal period. This principle ensures accurate financial statements and helps assess a company's profitability.

Step-by-step explanation:

The concept of matching expenses with revenue is an important accounting principle. It means that expenses incurred to earn revenue should be reported in the same fiscal period as the revenue is earned. This ensures that the financial statements accurately reflect the financial performance of a business during a specific period.

For example, if a company sells a product in January, the cost of producing that product should be recognized as an expense in January as well. This way, the revenue and the associated expense are matched in the same period.

Matching expenses with revenue helps provide a clearer picture of a company's profitability and financial health.