Company „Cars Inc.“ produces spare parts for the automotive industry. In the year 2019 the company experienced overall rather high demand for its products. During year end controlling department provided following data to the management:

Sold break systems in 2019:                     23.800 with average price of $ 580

Produced break systems in 2019:           21.000 with average cost of $ 480.

Analyse and interpret those numbers especially considering the matching principle and the effects to all elements of the financial statements, i.e. balance sheet (inventory), income statement (Cost-of-goods-sold, Gross profit) and cash-flow statement (for CF: considering only operational activities, assuming all revenues/costs have been paid before year end; no inventory at the beginning of the year 2019).

Answer rating: 100% (QA)

Answer Matching Principle The matching principle is a fundamental accounting concept that suggests that assets should be reported on the balance sheet in the period in which they are used to generate ... View the full answer