The correct answer is: A. Matching concept
The matching concept is a fundamental accounting principle that requires expenses to be matched with the revenues they generate. This means that expenses should be recognized in the same period as the revenues they help to generate. For example, if a company sells goods on credit, the revenue from the sale should be recognized in the period in which the goods are sold, even though the cash may not be received until a later period.
The matching concept helps to ensure that financial statements provide a fair and accurate picture of a company’s financial performance. By matching expenses with the revenues they generate, the matching concept helps to avoid overstating or understating income.
The other options are incorrect because:
- The accounting period concept is the principle that financial statements should be prepared for a specific period of time, such as a month, quarter, or year.
- The money measurement concept is the principle that only transactions that can be measured in monetary terms should be recorded in the financial statements.
- The cost concept is the principle that assets should be recorded at their historical cost.