Question

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

Answer 1

Answer:

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Answer 2

The answer is stated below:

Explanation:

• Matching concept is the one of the vital concept, in the practice of accounting whereby the business acknowledge the revenues and their related expenses in the same accounting year.

• Business report the revenue along with the expenses which bought them, its purpose is to avoid the misstating earnings of the accounting year.

• The entities of the business need to follow the concept as it is primarily to ascertain the true loss or the profit during the accounting year, which leads to either undercasting or overcasting of the loss or profit, which might not reveal the correct efficiency of the business and the activities related to the accounting year.

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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.