Practice Question
Which of the following best defines the matching process in accounting?
- Recognizing revenue only when cash is received.
- Recognizing expenses in the same period as the revenues they help generate.
- Recording transactions in the order they occur.
- Reporting financial statements quarterly instead of annually.
Answer +
Correct Answer: B
Explanation +
The matching process in accounting refers to recognizing expenses in the same period as the revenues they help generate. This principle ensures that income statements accurately reflect a company’s profitability for a given period.
For example, if a business incurs costs to manufacture goods, those costs must be recorded in the same period in which the related sales are recognized. This enhances the quality and comparability of financial statements.