When should expenses be recognized according to the matching principle?

When should expenses be recognized according to the matching principle?

• A. When they are paid
• B. When services are rendered or goods are delivered
• C. At the end of the fiscal year only
• D. Only when the cash is received

Answer: (B)

The matching principle is a fundamental accounting concept that requires expenses to be recognized in the same period as the revenues they help to generate. According to this principle, expenses should be recorded when the related services are rendered or goods are delivered, regardless of when the payment is made. This approach provides a more accurate representation of a company's financial position and performance during a specific accounting period. By recognizing expenses at the time services are provided or goods are received, businesses ensure that their financial statements reflect the true costs associated with generating revenue. This method is essential for understanding profitability and financial health, as it aligns income and expenses, thereby giving stakeholders a clearer picture of operational efficiency.

The matching principle is a fundamental accounting concept that requires expenses to be recognized in the same period as the revenues they help to generate. According to this principle, expenses should be recorded when the related services are rendered or goods are delivered, regardless of when the payment is made. This approach provides a more accurate representation of a company's financial position and performance during a specific accounting period.

By recognizing expenses at the time services are provided or goods are received, businesses ensure that their financial statements reflect the true costs associated with generating revenue. This method is essential for understanding profitability and financial health, as it aligns income and expenses, thereby giving stakeholders a clearer picture of operational efficiency.