what the matching principle is, and its importance?
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.
Define the principle of conservatism and its importance.
if a company declared bankruptcy its financial statements likely Colgate a the matching principle b the realization principle c the stable monetary Unit assumption d the going concern assumption
What are the advantages and disadvantages of the matching principle and the revenue recognition principles from an investor's perspective?
The accounting matching principle dictates that we:
The accounting matching principle dictates that we:
What is depreciation and how does it relate to the matching principle? Is depreciation an exact calculation? If not, what estimates are involved? What happens in the accounting records if we estimate that a car will last for 5 years and it lasts for 7 years?
Explain the concept of the matching principle. Discuss how depreciation can be justified as an expense under the matching principle?
Which of the following statements is true concerning the matching principle? a. All costs can be indirectly matched with periods in which they provide a benefit. b. The association of assets for a period with the liabilities necessary to generate the assets is known as the matching principle. c. Cost of goods sold matched with sales revenue is a classic example of direct matching under the matching principle. d. All costs can be directly matched with revenue.
Explain the revenue recognition principle and the matching principle. Differentiate between the cash basis and the accrual basis of accounting. Explain why adjusting entries are needed and identify the major types of adjusting entries.
How does the Matching Principle relate to the Cost of Goods Sold?