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Question
The basic concepts related to P & L A/c are ________________.
The basic concepts related to P & L A/c are ________________.
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Solution
The correct option is D Both A and B above
Realization concept assumes that the revenue is recognized only when there is sale or transfer of goods or assets. Sale is complete when the title of goods is passed on to the buyer.
Matching concept is based on accounting period concept. It assumes that all transactions relating to income & expenses must be recorded in the books of accounts based on the accounting period followed by the business. Hence all adjustment entries like outstanding expenses, prepaid expenses are to be passed in books of account to get the correct profitability.
Realization concept assumes that the revenue is recognized only when there is sale or transfer of goods or assets. Sale is complete when the title of goods is passed on to the buyer.
Matching concept is based on accounting period concept. It assumes that all transactions relating to income & expenses must be recorded in the books of accounts based on the accounting period followed by the business. Hence all adjustment entries like outstanding expenses, prepaid expenses are to be passed in books of account to get the correct profitability.
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