Final answer:
The statement that matching expenses against revenues means to subtract expenses from revenues earned in the same time period is true, according to the matching principle of accounting. This practice ensures that financial performance is accurately reflected for that period. For governments, a budget deficit is addressed through borrowing or other means.
Step-by-step explanation:
Matching expenses against revenues refers to the accounting principle known as the matching principle. This principle states that expenses should be recorded in the same accounting period as the revenues that are earned as a result of these expenses. Therefore, the statement that matching expenses against revenues means to subtract expenses incurred during one time period from revenues earned during the same time period is True.
For example, if a company earns revenue of $200,000 and has explicit costs (expenses) amounting to $85,000 in the same fiscal period, subtracting the costs from the revenue results in an accounting profit of $115,000. This approach to accounting ensures that financial statements provide a true picture of a company's profitability during a specific time frame.
When governments run budget deficits, they must make up the differences between tax revenue and spending, often through borrowing or other financing mechanisms. The deficit or surplus is the difference between the tax revenue collected and spending over a fiscal year.