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Adjustments and the Matching Principle
Quick questions on The matching principle: N(A)-Level Principles of Accounts
5short Q&A pairs drawn directly from our worked dot-point answer. For full context and worked exam questions, read the parent dot-point page.
What is the accrual basis?Show answer
Under the accrual basis, income is recorded when it is earned and expenses when they are incurred, not when cash changes hands. This contrasts with the cash basis, which records things only when cash is received or paid. At N(A)-Level we use the accrual basis, because it gives a truer picture of performance.
What is the matching principle?Show answer
The matching principle follows from the accrual basis: the expenses charged in a period should be those that helped earn the income of that same period. If a cost benefits a later period, it is carried forward; if a cost belongs to this period but is unpaid, it is still charged now.
What is q1?Show answer
State what the accrual basis records expenses against. [1 mark]
What is q2?Show answer
Rent of \3\,600$ is paid for a year on 1 October; the year ends 31 December. How much is this year's expense? [2 marks]
What is q3?Show answer
Explain why a year-end adjustment is needed for wages that are owing but unpaid. [2 marks]
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