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Question
According to which of the following principles all costs which are applicable to revenue of the period should be charged against that revenue?
According to which of the following principles all costs which are applicable to revenue of the period should be charged against that revenue?
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Solution
The correct option is D Matching
The process of ascertaining the amount of profit earned or the loss incurred during a particular period involves deduction of related expenses from the revenue earned during that period.
The matching concept emphasises exactly on this aspect. It states that expenses incurred in an accounting period should be matched with revenues during that period.
It follows from this that the revenue and expenses incurred to earn these revenues must belong to the same accounting period.
The process of ascertaining the amount of profit earned or the loss incurred during a particular period involves deduction of related expenses from the revenue earned during that period.
The matching concept emphasises exactly on this aspect. It states that expenses incurred in an accounting period should be matched with revenues during that period.
It follows from this that the revenue and expenses incurred to earn these revenues must belong to the same accounting period.
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