Question

What basic underlying accounting principle requires that some expenses and liabilities be accrued or deferred?

Option 1: Materiality principle
Option 2: Consistency principle
Option 3: Revenue recognition principle
Option 4: Matching principle

Answer 1

The basic underlying accounting principle that requires some expenses and liabilities to be accrued or deferred is the Matching principle.

Step-by-step explanation:

The basic underlying accounting principle that requires some expenses and liabilities to be accrued or deferred is the Matching principle. This principle states that expenses should be recognized and reported in the same accounting period as the revenue they help to generate. It ensures that the financial statements accurately reflect the financial performance of a business over a given period of time.For example, if a company incurs expenses in one accounting period, but the related revenue is not recognized until the next accounting period, the matching principle requires the company to accrue or defer those expenses to match them with the revenue.