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JIA Quiz

Which of the following best defines the matching principle in financial accounting?

A. Expenses must always be paid in cash during the exact month they occur

[X] Incorrect. Cash timing does not dictate expense recognition under the matching principle.

B. Expenses must be recorded in the same period as the revenues they helped to generate

[V] Correct! The matching principle links expenses directly to the revenues of the corresponding period.

C. All business costs should be immediately written off as losses in the year incurred

[X] Incorrect. Capital expenditures and prepaid items are capitalized and expensed over time.

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