Explain the meaning of periodic matching of costs and revenues.
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Answer:- matching means the appropriate Association of related revenues and cost profit or loss could be ascertained only when the revenue or during the period is compared with the expenditure incurred during same period. receipts and payments of cash is irrelevant
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The meaning of periodic matching of costs and revenues is appearing first to a financial expense in a firm which is caused for gaining or earning incomes which are recorded.
Explanation:
- One of the biggest examples of this is prepaid expense as we do not show prepaid items as an expense because they do not relate to the particular time point or does not been utilized for making money in that particular period of time.
- Another example of this is cost of goods sold in accounts is always shown in the trading account for the income of sales to calculate the total profit or the profit earned.
- The same happens in depreciation in which the firm is the asset to earn the income so the firm take the periodic expense as an expense which will not be shown
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