Western Governors University (WGU) FINC6000 C214 Financial Management Practice Exam

Question: 1 / 400

What does the matching principle in accrual accounting require regarding revenues?

Revenues be recognized in the period received

Revenues be recognized before expenses are incurred

Revenues be recognized when the earnings process is complete and matches expenses to revenues

The matching principle in accrual accounting stipulates that revenues should be recognized when the earnings process is complete, which typically occurs when goods or services have been delivered or performed, regardless of when cash is received. This principle is fundamental because it aligns the recognition of revenues with the expenses incurred to generate those revenues during the same accounting period.

By matching revenues and expenses, financial statements can provide a clearer picture of a company's financial performance during a specific time frame. This approach ensures that the income statement reflects the true profitability of a company by indicating the revenues earned in conjunction with the costs associated with generating those revenues. Hence, option C accurately articulates this essential characteristic of accrual accounting.

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Revenues can be recognized at any time during the fiscal year

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