Answer: C. The use of the allowance method of accounting for bad debts
Step-by-step explanation:
Here is the complete question:
The matching principle requires:
A. That expenses be ignored if their effect on the financial statements are less important than revenues to the financial statement user.
B. The use of the direct write-off method for bad debts.
C. The use of the allowance method of accounting for bad debts.
D. That bad debts be disclosed in the financial statements.
E. That bad debts not be written off.
The matching principle is also referred to as the revenue recognition principle and it simply states that recording of revenues should be done during the period when they are earned, without taking into consideration when transfer of cash takes place.
The matching principle, requires using allowance method of accounting for bad debts as this will ensure that the bad debt expenses are matched to revenue.