Which of the following accounting principles prescribes

Subject : Business

Question: Which of the following accounting principles prescribes that a company record its expenses incurred to generate the revenue reported?

A) Matching principle

B) Consideration assumption

C) Going concern assumption

D) Business entity assumption

E) Cost principle

Expert Verified Solution:

The correct answer is:

A) Matching principle.

Explanation:

The matching principle is an accounting principle that dictates that a company should record its expenses in the same period as the revenues they help generate. This principle ensures that expenses are matched with the corresponding revenues in the financial statements, providing a more accurate representation of a company’s profitability during a specific period.

In contrast:

B) Consideration assumption is not a standard accounting principle.

C) Going concern assumption assumes that a company will continue to operate indefinitely unless there is evidence to the contrary.

D) Business entity assumption states that a business’s financial activities should be kept separate from those of its owners or other businesses.

E) Cost principle states that assets should be recorded at their cost at the time of acquisition, not their current market value.