On April 1, 2017, Windsor, Inc. paid $41300 cash for equipment that will be used in business operations. The equipment will be used for four years. Windsor's records depreciation expense of $41300 for the calendar year ending December 31, 2017. Which accounting principle has been violated?
The matching principle requires that an asset's cost must be allocated to Depreciation Expense over the life cycle of the asset. The asset's cost is divided by its life cycle, and should be reported proportionally during the life of the asset.
Windsor should have depreciated its equipment during four years (48 months).
