Mr. $A$ purchased goods for Rs. $15, 00, 000$ and sold 4/5th of the goods amounting to Rs. $20, 00, 000$ and met expenses amounting to Rs. $2, 50, 000$ during the year. His net profit is Rs. $5, 50, 000$ . Which of the accounting concepts was followed by him?

Entity

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Periodicity

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Matching

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Conservatism

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Solution

The correct option is B Matching
The matching principle requires that revenues and any related expenses be recognized together in the same reporting period.
Thus, if there is a cause-and-effect relationship between revenue and certain expenses, then record them at the same time. If there is no such relationship, then charge the cost to expense at once.
This is one of the most essential concepts in accrual basis accounting, since it mandates that the entire effect of a transaction be recorded within the same reporting period.

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Mr. A purchased goods for Rs. 15,00,000 and sold 4/5th of the goods amounting to Rs. 20,00,000 and met expenses amounting to Rs. 2,50,000 during the year. His net profit is Rs. 5,50,000. Which of the accounting concepts was followed by him?

Mr. $A$ purchased goods for Rs. $15, 00, 000$ and sold 4/5th of the goods amounting to Rs. $20, 00, 000$ and met expenses amounting to Rs. $2, 50, 000$ during the year. His net profit is Rs. $5, 50, 000$ . Which of the accounting concepts was followed by him?