Question

By matching revenue earned during the accounting period to related incurred expenses

a.net income or loss will always be overestimated
b.net income or loss will be properly reported on the income statement
c.net income or loss will always be underestimated
d.net income or loss will not be determined

Answer 1

1. Bill for ads that appeared in prior month's local newspaper.Accrued expense
2. Fees received but not yet earned.Unearned revenue
3. Fees earned but not yet received.Accrued revenue
4. Premium paid on a one-year insurance policy.Prepaid expense
5. Rent received in advance for rental of office space.Unearned revenue
6. Supplies on hand.Prepaid expense
7. Rent paid in advance.Prepaid expense
8. Wages owed but payable in the following period

Answer 2

Net income or loss will be properly reported on the income statement by matching revenue earned during the accounting period to related incurred expenses.

According to Matching concept in Accounting, Expenses and related revenue must be recorded in the same accounting period.

• The purpose of this concept is to avoid possible mis-statement of  earnings for a period.

• Adhering to this concept ensures proper entry into the income statement.

• In short, revenues and expenses must recognized in the same period.

In conclusion, the net income or loss will be properly reported on the income statement if the concept are used.

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