Mohan purchased goods for Rs. $15, 00, 000$ and sold $4 / 5^{t h}$ of the goods amounting Rs. $18, 00, 000$ and paid expenses amounting Rs. $2, 70, 000$ during the year, $2005$ . He paid Rs. $5000$ for an electricity bill of Dec. $2004$ and advance salaries amounting Rs. $15, 000$ was paid for the month of Jan. $2006$ . He counted net profit as Rs. $3, 50, 000$ .
The profit calculated by him is correct according to ___________.

Entity concept

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Periodicity concept

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Matching concept

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Conservatism concept

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Solution

The correct option is C Matching concept
As per Matching Concept, While calculating the net profit, expenses of the particular duration should be deducted from the respective revenue.
Here, the revenue = 18,00,000
and Purchase for the year = 15,00,000 x 4 / 5 = 12,00, 000
Expenses for the year = 270000 - 15000 (adv. salaries) - 5000 (electricity) = 250000
Therefore, Net Profit = 18,00,000 - 12,00,000 - 250000
= 3,50,000

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