Question

The matching principle in accounting requires the matching of:

1) revenue earned with the assets used less in the liabilities incurred
2) revenue earned with the expenses incurred to produce the revenue
3) revenue earned with the assets used to produce the revenue
4) revenue earned with the liabilities incurred to produce the revenue

Answer 1

The matching principle in accounting requires revenue to be matched with the expenses incurred to produce that revenue. Correct option is 2)

Step-by-step explanation:

The matching principle in accounting requires the matching of revenue earned with the expenses incurred to produce the revenue. This means that the costs associated with generating revenue should be recorded in the same accounting period as the revenue itself. For example, if a company sells goods in January, the cost of producing those goods should also be recognized as an expense in January.

The principle ensures that the financial statements provide an accurate representation of the company's performance and profitability for a given period. By matching revenue with the expenses directly related to generating that revenue, the company can determine its net income more accurately.

Thus, the correct option is 2) revenue earned with the expenses incurred to produce the revenue.