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- 1 Marks
Question
In the process of drawing up financial statements, adjustments are made for prepaid expenses and accrued expenses in order to comply with which fundamental accounting concept?
A. Matching
B. Prudency
C. Aggregation
D. Accrual
E. Consistency
Answer
Answer: A
Explanation: The correct answer is A (Matching). The Matching Concept in accounting ensures that expenses are recorded in the same period as the revenues they help generate. Prepaid and accrued expenses are adjusted to match them with the appropriate accounting periods. This ensures that financial statements reflect the true financial position of the business by aligning income and expenses correctly.
- Tags: Accounting principles, Accrual Accounting, Matching Concept
- Level: Level 1
- Uploader: Dotse