Which of the following methods is used under the income approach ...

[khang]

Which of the following methods is used under the income approach of business valuation?
 
  A) net asset value method
  B) capitalization of earnings method
  C) dividend payout method
  D) guideline transaction method

Question 2

Explain the matching principle and provide two examples of how it is applied in accounting records.

[Kjones0604]

Answer to Question 1

B
Explanation: B) The most common method under the income approach is the capitalization of earnings (COE) method.

Answer to Question 2

The matching principle requires that recorded expenses match up with revenues for the same period of time. It is important to record expenses with the revenues they earn to produce an accurate net income or loss. Examples include adjusting for insurance, depreciation, and wages.