Question

Which accounting principle ensures that expenses are recognized in the same period as the revenues they help generate, and assumes that a business will continue to operate indefinitely?

a) Consistency principle
b) Materiality principle
c) Matching principle
d) Conservatism principle

Answer 1

The correct answer is the Matching principle, which aligns expenses with generated revenues in the financial statements. The assumption that a business will operate indefinitely is known as the going concern principle.

Step-by-step explanation:

The accounting principle that ensures expenses are recognized in the same period as the revenues they help generate, and assumes that a business will continue to operate indefinitely is the c) Matching principle. Under the matching principle, companies are required to report all expenses that are directly related to the generation of revenue in the same period as the revenue is earned, thereby providing a more accurate picture of a company's financial performance for a given period. In contrast, the assumption that a business will continue to operate indefinitely is related to the going concern principle, which is a fundamental presumption in accounting that affects the valuation of assets and liabilities.