![]() YESTER, an insurance company, tends to receive an insurance premium from its customers. Thus, one must be considerate of the factors to avoid errors. ![]() While the matching principle accounting accurately represents the finances of the organisation, it often misses the effects of inflation. Additionally, the matching concept accounting can have a duality. Often students get confused between the two concepts of accounting. The matching concept in accounting comes under the purview of accrual accounting. Thus, here it would be wrong to imply that a loss of two thousand rupees was incurred since the company invested four thousand rupees in the production of all commodities. In other words, in matching principle accounting, the revenue must be considered first for the given period, and then one must see the expenses incurred to produce that revenue. ![]() The Matching principle dictates that although the total cost of production was four thousand, the profit would be twelve hundred rupees despite the revenue being 2000. Later, it sells twenty copies for fifty rupees per unit, thereby getting revenue of two thousand rupees. Let's suppose a company produces a hundred books for the cost of four thousand. Thus, if a salesperson can sell 200 copies of a book in January, then the cost price of those 200 copies must be matched with the income for January to calculate the profit or loss. The accrual or matching principle tells us to calculate the cost associated with the production of the commodity simultaneously with the revenue associated with the sold commodities. Product Costs: Product costs are related to the expenses made for the production of the cost. Here, expenses must be documented in the timeframe of their incurrence rather than when you pay the amount according to the matching concept in accounting. They are only mentioned in the statement when they occur. Period Costs: These are the costs that are not directly linked to the product, such as commissions, office supplies, or rent. To further explain the matching concept, let us define period costs and product costs. What is the Matching Concept in Accounting? Thus, the matching principle accounting says that the income statement of the organization will be reflective of the associated cost of the revenues and the income of that period. It simply implies that revenue and production costs must be calculated during the same accounting period. Accrual accounting is the process of matching revenues, i.e., the income generated through the retail of a commodity, and the expenses, i.e. The matching concept in accounting as a principle applies to accrual accounting. Although there exists no certain matching concept definition, this text will try to articulate a meticulous definition along with the real-time use of the matching principle. By the end, you will be able to grasp period cost and products cost associated with the matching concept. To abide by the matching principle, accounting requires accuracy and perfection in the documentation of revenues and expenses. The matching concept is just one of those principles. All the statements must be prepared and calculated in such a way that they respect all of them. When it comes to the interpretation of financial statements, there are 14 principles in accounts that govern them.
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