Question

5. At the end of the fiscal year, an adjusting entry is made that increases both...

5. At the end of the fiscal year, an adjusting entry is made that increases both interest expense and interest payable. This entry is an application for which accounting principle?

a.

Full disclosure

b.

Realization

c.

Matching

d.

Going concern
Business   Accounting   
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Answer #1
The matching principle is one of the basic underlying accounting principle. The matching principle requires a company to report an expense on its income statement in the period in which the related revenues are earned. As a results of which a liability is appear on the balance sheet for the end of the accounting period. The matching principle is associated with the accrual basis of accounting and adjusting entries. Hence, an adjusting entry that increases both the interest expense and interest payable is an application of matching principle.
Correct answer is option c. (i.e. Matching principle )
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