MATCHING CONCEPT:
In this concept, all expenses matched with the revenue of that period should only be taken into consideration. In the financial statements of the organisaton if any revenue is recognised then expenses related to earn that revenue should also be recognised.
This concept is based on accrual concept as it considers the occurrence of expenses and income and do not concentrate on actual inflow or outflow of cash. This leads to adjustment of certain items like prepaid and outstanding expenses, unearned or accrued incomes.
It is not necessary that every expense identify every income. Some expenses are directly related to the revenue and some are time bound.
for example, - selling expenses are directly related to sales but rent, salaries etc are recorded on accrual basis for a particular accounting period. In other words periodicity concept has also been followed while applying matching concept.
In this concept, all expenses matched with the revenue of that period should only be taken into consideration. In the financial statements of the organisaton if any revenue is recognised then expenses related to earn that revenue should also be recognised.
This concept is based on accrual concept as it considers the occurrence of expenses and income and do not concentrate on actual inflow or outflow of cash. This leads to adjustment of certain items like prepaid and outstanding expenses, unearned or accrued incomes.
It is not necessary that every expense identify every income. Some expenses are directly related to the revenue and some are time bound.
for example, - selling expenses are directly related to sales but rent, salaries etc are recorded on accrual basis for a particular accounting period. In other words periodicity concept has also been followed while applying matching concept.
No comments:
Post a Comment