Explain Going Concern Assumption and Matching Concept.
Explain Going Concern Assumption and Matching Concept.
Going Concern Assumption: This assumption assumes that every business has a long and indefinite life. since financial statements are prepared on the basis of this assumption, all fixed assets are shown in the books at their cost ignoring their market value. In fact, the market value of a fixed asset has no relevance under this assumption, since these assets are acquired for continuous use in the business and not to sell them at a profit. It is again even though they may be unsaleable.
Matching Concept: This principle states that it is necessary to charge all the expenses incurred to earn revenue during the accounting period against that revenue, in order to ascertain the net income or trading results of the business. The matching principle which is so closely related to accrual principle and accounting period principle helps a businessman in realizing his objective i.e. in ascertaining the trading results or profit or loss from the business.
Going Concern Assumption: This assumption assumes that every business has a long and indefinite life. since financial statements are prepared on the basis of this assumption, all fixed assets are shown in the books at their cost ignoring their market value. In fact, the market value of a fixed asset has no relevance under this assumption, since these assets are acquired for continuous use in the business and not to sell them at a profit. It is again even though they may be unsaleable.
Matching Concept: This principle states that it is necessary to charge all the expenses incurred to earn revenue during the accounting period against that revenue, in order to ascertain the net income or trading results of the business. The matching principle which is so closely related to accrual principle and accounting period principle helps a businessman in realizing his objective i.e. in ascertaining the trading results or profit or loss from the business.
