Insurance expense not matched to benefit periods

Steps:

• Identify the error: Full insurance payment expensed in current year, despite half benefiting next year.
• Recall matching principle: Expenses must align with the periods they support.
• Analyze violation: Prepaying coverage means half the expense should be deferred as a prepaid asset.
• Confirm principle: This misallocation ignores period-specific benefits.

Why C is correct:

• Matching principle requires expenses to be recognized in the period they generate revenue or provide benefits, per accrual accounting rules.

Why the others are wrong:

• A. Duality: Refers to double-entry bookkeeping where debits equal credits; not about expense timing.
• B. Historic cost: Involves recording transactions at original value; irrelevant to allocation across periods.
• D. Money measurement: Limits records to monetary items; payment is already monetary.

Final answer: C