Question

What is Matching concept? Why should a business concern follow this concept? Discuss.

Answer 1

The matching concept is an accounting practice whereby firms recognize revenues and their related expenses in the same accounting period. Firms report "revenues," that is, along with the "expenses" that brought them. The purpose of the matching concept is to avoid misstating earnings for a period.

The business entities follow this concept mainly to ascertain the true profit or loss during an accounting period.This leads to either overcasting or undercasting of the profit or loss, which may not reveal the true efficiency of the business and its activities in the concerned accounting period.