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what the matching principle is, and its importance?

what the matching principle is, and its importance?

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MATCHING PRINCIPLE / CONCEPT :-

Profit earned by business during a period can be correctly measured only when revenue earned during the period is matched with the expediture incurred to earn that revenue. It is not relevant when the payment was made or received.

Therefor, due to this concept Adjustments are made for all outstanding expenses, prepaid expenses, occurred / receivable income, income received in advance.

This concept is based on the Accounting period concept.

IMPORTANT OF MATCHING CONCEPT

  Important of matching concept are as follow

:- To know the actual position or performance of business in particular year , either it can be calender year , financial year etc...

:- Accounting matching principals is very important to show the correct year result

:-The matching principle in accounting is meant to ensure that all the expenses of a business should be recorded in the very period in which they are accrued. This prevents confusion where payments are done in a period much later than the accruals.

The Matching Principle is a rule that requires that expenses be recorded and reported in the same period as the revenue that those expenses help earn. It is a fundamental concept of accrual accounting as it is the association between the economic benefits and economic cost.

  

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