Question

As per the Matching concept, Revenue – ? = Profit
a) Expenses
b) Liabilities
c) Losses
d) Assets
​

Answer 1

Answer:

Revenue - expenses = profit

Answer 2

As per the Matching concept, Revenue – a) Expenses = Profit

Definition of Accrual basis/Matching concept:-

Accrual basis is a "method of accounting" followed by the entrepreneurs generally, as it is based on the "matching concept", revenues and expenses are recorded in the books of accounts "when the transactions are done" not when the cash inflows or outflows.

Characteristics of the Matching concept are:-

• The Matching concept gives a real-time effect on the financial position of the firm.

• Unlike, cash accounting, in which the transactions are recorded only when the cash is received or given, it is preferable for the small business.

• In the matching concept, the effect of the transaction is made immediately which shows the real financial position if a sale is made, regardless of cash received or not the transaction of sale will get passed in books.

Thus, we record both the effects of a single transaction in the matching concept, a credit and a debit side, which in return reflects the actual position of an entity.