The matching concept requires that: MCQ with Answer and Explanation

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The matching concept requires that:

A. Debits equal credits

B. Assets should equal liabilities

C. Profits should match cash

D. Expenses should be matched with revenues of the same period

Answer: Option D

Solution (By JKSSB Mock Tests)

Matching principle states that expenses incurred to earn revenues should be recognized in the same accounting period.

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

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Question #1

In financial management, the 'Degree of Operating Leverage' (DOL) at a given level of sales is calculated as:

A. Sales / Contribution

B. Contribution / Net Profit

C. Contribution / EBIT

D. EBIT / Net Profit

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Correct Answer: Option C

Explanation:
The Degree of Operating Leverage (DOL) measures the sensitivity of EBIT to changes in sales. It is calculated as Contribution divided by EBIT (Earnings Before Interest and Taxes).

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

Question #2

Under Ind AS 115, 'Variable Consideration' (like bonuses or penalties) can only be included in the transaction price if:

A. The performance obligation is fully satisfied.

B. The entity has received the cash for the variable consideration.

C. The customer has explicitly agreed to the variable amount in the contract.

D. It is highly probable that a significant reversal in the amount of cumulative revenue will not occur.

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Correct Answer: Option D

Explanation:
Ind AS 115 imposes a constraint on variable consideration. It can only be included in the transaction price to the extent that it is highly probable that a significant reversal of revenue will not occur when the uncertainty is resolved.

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Question #3

A: EOQ (Economic Order Quantity) minimizes the total cost of inventory. R: EOQ balances ordering costs and carrying costs. Choose the correct option.

A. A is true but R is false

B. Both A and R are true but R is NOT the correct explanation of A

C. Both A and R are true and R is the correct explanation of A

D. A is false but R is true

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Correct Answer: Option C

Explanation:
EOQ is the order quantity that minimizes total inventory costs. It achieves this by finding the point where total ordering costs equal total carrying costs. R correctly explains the mechanism of EOQ.

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