Question

The adjusting process is based on two accounting principles; The two accounting principles are _______________.

• A. Realization and recognition
• B. Revenue recognition and matching
• C. Cost and business entity
• D. Continuing-concern and realization

Answer 1

Answer: (B)

Revenue recognition and matching

The revenue recognition (realization) principle states that the income should be recognised when it is earned;

the matching principle states that expenses shall be reported in the same time period when the respective revenue is recognised.