Matching Concept Lester Brown opened a small plumbing repair business two years ago when he left his previous job. By electing to immediately take his accumulated retirement benefits from his former employer in cash, Lester was able to purchase a small lot on which he hopes to build a retail outlet sometime next year, purchase a new panel truck for the business, and prepay the health insurance costs for himself and his three employees for the next four years.

The concept of matching is important in determining the amount to be reported as periodic income.

a. Define matching and explain why it is important in the income determination process.

b. For each of Lester’s three cash payments, determine how the matching concept should be applied.