- CFA Exams
- CFA Level I Exam
- Topic 4. Financial Statement Analysis
- Learning Module 2. Analyzing Income Statements
- Subject 2. Expense Recognition - Inventory
CFA Practice Question
The matching principle is best demonstrated by ______.
B. the equation A = L + OE
C. allocating the cost of an asset to expense over the periods during which benefits are derived from ownership of the asset
D. offsetting the cash receipts of the period with the cash payments made during the period
A. using debits to record decreases in owner's equity and credits to record increases
B. the equation A = L + OE
C. allocating the cost of an asset to expense over the periods during which benefits are derived from ownership of the asset
D. offsetting the cash receipts of the period with the cash payments made during the period
Correct Answer: C
User Contributed Comments 4
| User | Comment |
|---|---|
| Naufil2004 | Why is choice B incorrect? |
| Gina | because the matching principle is about identifying expenses, measuring them, and matching them against the revenues earned in the same period, ie it's an allocation issue. |
| myanmar | isn' C depreciation? |
| guna | with one exception, C could be depreciation, if it mentions economic useful life instead of ownership of the asset. |