Neco Model Questions Vol1 2025 Financial Accounting Question 23

Practice objective / multiple choice question 23 from the 2025 Neco Model Questions Vol1 Financial Accounting examination.

Neco Model Questions Vol1 2025 Financial Accounting Objective / Multiple Choice Easy Difficulty
Question 23 NECO_MODEL_QUESTIONS_VOL1 • 2025 • FINANCIAL_ACCOUNTING • objective

A company prepares its accounts on the accrual basis and expects to sell all its inventory within the next twelve months. Explain how the matching principle influences the timing of expense recognition for the cost of goods sold in this situation.

Answer Options

A. Expenses are recognised only when cash is paid for the inventory, linking expense recognition to cash outflows instead of revenue.
B. Expenses are recognised at the end of the fiscal year regardless of when the related sales occur, so cost of goods sold is recorded at year‑end.
C. Expenses are recognised when the inventory is purchased, matching the cost with the purchase date rather than the sales revenue period.
Correct Answer D. Expenses are recognised in the same period as the related sales revenue; thus the cost of inventory is recorded as cost of goods sold when the inventory is sold, not when it is purchased.
Correct Answer
D
Correct Option:
Expenses are recognised in the same period as the related sales revenue; thus the cost of inventory is recorded as cost of goods sold when the inventory is sold, not when it is purchased.

About This Question

This is Neco Model Questions Vol1 2025 Financial Accounting Question 23. It is one of the objective questions from the 2025 Neco Model Questions Vol1 Financial Accounting examination.

Difficulty level: Easy .

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