matching
7.1 Accounting Principles
In this section we’ll explore the rules that help businesses keep their financial records tidy and trustworthy. 📊
Core Principles
- Accrual Principle – Record transactions when they happen, not when cash moves. 💸
- Conservatism Principle – Record expenses and liabilities as soon as you know them, but only record gains when they’re certain. ⚖️
- Consistency Principle – Use the same methods from one period to the next so you can compare results. 🔁
- Going‑Concern Principle – Assume the business will keep operating unless you have evidence it won’t. 🏢
- Matching Principle – Match the costs of producing goods or services with the revenue they help generate. 📈
Matching Exercise
Match each principle with its correct definition. Write the letter of the definition next to the principle number.
- Accrual Principle
- Conservatism Principle
- Consistency Principle
- Going‑Concern Principle
- Matching Principle
| Definition | Answer Key |
|---|---|
| Record transactions when they occur, regardless of when cash is received or paid. | A |
| Record expenses and liabilities as soon as they are known, but only record gains when they are certain. | B |
| Use the same accounting methods from period to period. | C |
| Assume the business will keep operating unless evidence suggests otherwise. | D |
| Match the costs of producing goods or services with the revenue they help generate. | E |
Answer Key:
- 1 – A
- 2 – B
- 3 – C
- 4 – D
- 5 – E
**Example** – If a company sells a product for $£100 and the cost to produce it was $£60, the Matching Principle says the $£60 expense should be recorded in the same period as the $£100 revenue. This keeps the financial picture honest and balanced. ??
Revision
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