Question

Bad debt expense is estimated and recorded in the period corresponding to the sale in which it was incurred because of which one of the following principles?

Select one:

a. Historical cost principle

b. Going concern principle

c. Economic entity principle

d. Full disclosure principle

e. Matching principle

Clear my choice

Answer 1

Correct Answer is e. Matching Principle

Explanation-

Matching principle is a generally accepted accounting policies followed by the companies for preperation of financial statement.

Expneses incurred during the period should be recorded in the same period in which related revenue is earned . Irrespective of the condition whether the payment for such expense has been made or not.

Bad Debts expense is estimated and recorded in the period corresponding to the sale in which it was incurred is because of Mactching principle of accounting.

Thus recording of bad debt expense estimated in period of sale is as per the matching Principle of Accounting.