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The matching principle, which governs the statement of profit or loss, requires that:
ACash receipts and cash payments be reported within the same accounting period
BAssets be recorded at the lower of their original cost and current market value
CExpenses of a period be matched with the revenues earned in that same period
DTotal debits recorded always equal the total credits recorded in the ledger
Answer & Solution
Correct answer: C. Expenses of a period be matched with the revenues earned in that same period
1. The matching principle relates to income statement accounts.
2. It states expenses incurred in a period should match the revenues earned in the same period.
3. This shows how much it cost to produce that period's revenue, so C is correct.
4. B is a measurement rule, A is cash-basis timing, and D is the double-entry rule, not matching.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §2.2 "Matching Principle", p.53_