Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

3. Accrual Accounting Concepts

Revenue Recognition and Expense Recognition

Financial Accounting

3. Accrual Accounting Concepts

Revenue Recognition and Expense Recognition

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Multiple Choice

When are product costs matched directly with sales revenue according to the matching principle?

When the related goods are sold to customers

When the goods are produced

When cash is received from customers

When the goods are purchased from suppliers

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Verified step by step guidance

Understand the matching principle: The matching principle in accounting states that expenses should be recognized in the same period as the revenues they help generate. This ensures accurate representation of financial performance.

Identify the nature of product costs: Product costs include direct materials, direct labor, and manufacturing overhead. These costs are incurred during the production of goods and are initially recorded as inventory on the balance sheet.

Determine when product costs are expensed: Product costs are not expensed immediately when incurred. Instead, they are matched with sales revenue when the related goods are sold to customers, as this is the point at which revenue is recognized.

Eliminate incorrect options: The options 'When the goods are produced,' 'When cash is received from customers,' and 'When the goods are purchased from suppliers' do not align with the matching principle. These events occur before the goods are sold and do not directly match expenses with revenue.

Conclude the correct timing: According to the matching principle, product costs are matched directly with sales revenue when the related goods are sold to customers, as this is when the revenue is earned and recognized.