The theoretical reason for recording periodic depreciation expense rather than immediately expensing the cost of a plant asset in the period it is acquired is to adhere to the:
A. Cost principle.
B. Monetary unit principle.
C. Going-concern principle.
D. Materiality principle.
E. Matching principle.
You own a CPA firm. You have agreed to provide accounting services in behalf of a client for a fee of $650 per month. Your services will be rendered uniformly during the year, and you begin your work on April 16. You use the accrual basis of accounting for your own company and prepare monthly financial statements for your firm. Your client makes his first payment of $650 to you on May 16. Which of the following entries will you record on May 16 when you receive the $650 cash payment?
A. Cash, debit, $325; Accounts Receivable, credit, $325.
B. Cash, debit, $650; Accounts Receivable, credit, $325; Fees Earned, credit, $325.
C. Cash, debit, $650; Fees Earned, credit, $650.
D. Accounts Receivable, debit, $650; Cash, credit, $325; Fees Earned, credit, $325.
E. None of the above.
E. Matching Principle
Since the asset will give benefits over a period of time, the expense is also recorded periodically to match the ...
The solution explains two multiple choice questions relating to financial accounting