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Read the following hypothetical Case Study and answer the given questions:
A business purchased goods for ₹2,00,000 and sold 75% of such goods during accounting year ended 31st March, 2020. The market value of remaining goods was ₹43,000. Accountant valued closing stock at cost. According to him,
(i) Owner of the business is treated as creditor to the extent of his capital;
(ii) All expenses incurred to earn revenue of a particular period should be charged against that revenue to determine the net income.
Financial statements are prepared on 31st March ever year.
According to which concept, all expenses incurred to earn revenue of a particular period should be charged against that revenue to determine the net income.
- a)Conservatism
- b)Business entity
- c)Accounting period
- d)Matching
Correct answer is option 'D'. Can you explain this answer?
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Read the following hypothetical Case Study and answer the given quest...
Matching principle is the accounting principle that requires that the expenses incurred during a period be recorded in the same period in which the related revenues are earned. This principle recognizes that businesses must incur expenses to earn revenues.
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Read the following hypothetical Case Study and answer the given quest...
Concept of Matching
The concept of matching is a fundamental principle in accounting that requires the matching of expenses incurred in a particular accounting period against the revenues generated in that same period. This concept ensures that the financial statements accurately reflect the financial performance of the business for a given period of time.
Explanation of Matching Concept in the Case Study
In the given case study, the business purchased goods for ₹2,00,000 and sold 75% of such goods during the accounting year ended 31st March, 2020. The market value of the remaining goods was ₹43,000. The accountant valued the closing stock at cost.
The concept of matching plays a role in determining the net income for the accounting period. According to the accountant, all expenses incurred to earn revenue in a particular period should be charged against that revenue to determine the net income. This means that the cost of goods sold, which is an expense directly related to generating revenue from the sale of goods, should be matched against the revenue generated from the sale of those goods.
Since the closing stock is valued at cost, it implies that the cost of goods sold would be calculated based on the cost of goods purchased. By valuing the closing stock at cost, the accountant is adhering to the matching concept by ensuring that the expenses (cost of goods sold) are matched against the revenue (sales) generated during the accounting period.
In this case, if the closing stock was valued at market value, it would have violated the matching concept. This is because the market value of the remaining goods is not an expense incurred to earn the revenue in the current period. Therefore, valuing the closing stock at market value would have resulted in an overstatement of expenses and understatement of net income.
Conclusion
The concept of matching in accounting requires the matching of expenses incurred in a particular period against the revenues generated in that same period. This concept ensures that the financial statements accurately reflect the financial performance of the business for a given period. In the given case study, the accountant valued the closing stock at cost, adhering to the matching concept by ensuring that the cost of goods sold is matched against the revenue generated from the sale of goods. This valuation method aligns with the principle that all expenses incurred to earn revenue should be charged against that revenue to determine the net income.
The concept of matching is a fundamental principle in accounting that requires the matching of expenses incurred in a particular accounting period against the revenues generated in that same period. This concept ensures that the financial statements accurately reflect the financial performance of the business for a given period of time.
Explanation of Matching Concept in the Case Study
In the given case study, the business purchased goods for ₹2,00,000 and sold 75% of such goods during the accounting year ended 31st March, 2020. The market value of the remaining goods was ₹43,000. The accountant valued the closing stock at cost.
The concept of matching plays a role in determining the net income for the accounting period. According to the accountant, all expenses incurred to earn revenue in a particular period should be charged against that revenue to determine the net income. This means that the cost of goods sold, which is an expense directly related to generating revenue from the sale of goods, should be matched against the revenue generated from the sale of those goods.
Since the closing stock is valued at cost, it implies that the cost of goods sold would be calculated based on the cost of goods purchased. By valuing the closing stock at cost, the accountant is adhering to the matching concept by ensuring that the expenses (cost of goods sold) are matched against the revenue (sales) generated during the accounting period.
In this case, if the closing stock was valued at market value, it would have violated the matching concept. This is because the market value of the remaining goods is not an expense incurred to earn the revenue in the current period. Therefore, valuing the closing stock at market value would have resulted in an overstatement of expenses and understatement of net income.
Conclusion
The concept of matching in accounting requires the matching of expenses incurred in a particular period against the revenues generated in that same period. This concept ensures that the financial statements accurately reflect the financial performance of the business for a given period. In the given case study, the accountant valued the closing stock at cost, adhering to the matching concept by ensuring that the cost of goods sold is matched against the revenue generated from the sale of goods. This valuation method aligns with the principle that all expenses incurred to earn revenue should be charged against that revenue to determine the net income.
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Read the following hypothetical Case Study and answer the given questions:A business purchased goods for ₹2,00,000 and sold 75% of such goods during accounting year ended 31st March, 2020. The market value of remaining goods was ₹43,000. Accountant valued closing stock at cost. According to him,(i) Owner of the business is treated as creditor to the extent of his capital;(ii) All expenses incurred to earn revenue of a particular period should be charged against that revenue to determine the net income.Financial statements are prepared on 31st March ever year.According to which concept, all expenses incurred to earn revenue of a particular period should be charged against that revenue to determine the net income.a)Conservatismb)Business entityc)Accounting periodd)MatchingCorrect answer is option 'D'. Can you explain this answer?
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Read the following hypothetical Case Study and answer the given questions:A business purchased goods for ₹2,00,000 and sold 75% of such goods during accounting year ended 31st March, 2020. The market value of remaining goods was ₹43,000. Accountant valued closing stock at cost. According to him,(i) Owner of the business is treated as creditor to the extent of his capital;(ii) All expenses incurred to earn revenue of a particular period should be charged against that revenue to determine the net income.Financial statements are prepared on 31st March ever year.According to which concept, all expenses incurred to earn revenue of a particular period should be charged against that revenue to determine the net income.a)Conservatismb)Business entityc)Accounting periodd)MatchingCorrect answer is option 'D'. Can you explain this answer? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Read the following hypothetical Case Study and answer the given questions:A business purchased goods for ₹2,00,000 and sold 75% of such goods during accounting year ended 31st March, 2020. The market value of remaining goods was ₹43,000. Accountant valued closing stock at cost. According to him,(i) Owner of the business is treated as creditor to the extent of his capital;(ii) All expenses incurred to earn revenue of a particular period should be charged against that revenue to determine the net income.Financial statements are prepared on 31st March ever year.According to which concept, all expenses incurred to earn revenue of a particular period should be charged against that revenue to determine the net income.a)Conservatismb)Business entityc)Accounting periodd)MatchingCorrect answer is option 'D'. Can you explain this answer? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Read the following hypothetical Case Study and answer the given questions:A business purchased goods for ₹2,00,000 and sold 75% of such goods during accounting year ended 31st March, 2020. The market value of remaining goods was ₹43,000. Accountant valued closing stock at cost. According to him,(i) Owner of the business is treated as creditor to the extent of his capital;(ii) All expenses incurred to earn revenue of a particular period should be charged against that revenue to determine the net income.Financial statements are prepared on 31st March ever year.According to which concept, all expenses incurred to earn revenue of a particular period should be charged against that revenue to determine the net income.a)Conservatismb)Business entityc)Accounting periodd)MatchingCorrect answer is option 'D'. Can you explain this answer?.
Read the following hypothetical Case Study and answer the given questions:A business purchased goods for ₹2,00,000 and sold 75% of such goods during accounting year ended 31st March, 2020. The market value of remaining goods was ₹43,000. Accountant valued closing stock at cost. According to him,(i) Owner of the business is treated as creditor to the extent of his capital;(ii) All expenses incurred to earn revenue of a particular period should be charged against that revenue to determine the net income.Financial statements are prepared on 31st March ever year.According to which concept, all expenses incurred to earn revenue of a particular period should be charged against that revenue to determine the net income.a)Conservatismb)Business entityc)Accounting periodd)MatchingCorrect answer is option 'D'. Can you explain this answer? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Read the following hypothetical Case Study and answer the given questions:A business purchased goods for ₹2,00,000 and sold 75% of such goods during accounting year ended 31st March, 2020. The market value of remaining goods was ₹43,000. Accountant valued closing stock at cost. According to him,(i) Owner of the business is treated as creditor to the extent of his capital;(ii) All expenses incurred to earn revenue of a particular period should be charged against that revenue to determine the net income.Financial statements are prepared on 31st March ever year.According to which concept, all expenses incurred to earn revenue of a particular period should be charged against that revenue to determine the net income.a)Conservatismb)Business entityc)Accounting periodd)MatchingCorrect answer is option 'D'. Can you explain this answer? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Read the following hypothetical Case Study and answer the given questions:A business purchased goods for ₹2,00,000 and sold 75% of such goods during accounting year ended 31st March, 2020. The market value of remaining goods was ₹43,000. Accountant valued closing stock at cost. According to him,(i) Owner of the business is treated as creditor to the extent of his capital;(ii) All expenses incurred to earn revenue of a particular period should be charged against that revenue to determine the net income.Financial statements are prepared on 31st March ever year.According to which concept, all expenses incurred to earn revenue of a particular period should be charged against that revenue to determine the net income.a)Conservatismb)Business entityc)Accounting periodd)MatchingCorrect answer is option 'D'. Can you explain this answer?.
Solutions for Read the following hypothetical Case Study and answer the given questions:A business purchased goods for ₹2,00,000 and sold 75% of such goods during accounting year ended 31st March, 2020. The market value of remaining goods was ₹43,000. Accountant valued closing stock at cost. According to him,(i) Owner of the business is treated as creditor to the extent of his capital;(ii) All expenses incurred to earn revenue of a particular period should be charged against that revenue to determine the net income.Financial statements are prepared on 31st March ever year.According to which concept, all expenses incurred to earn revenue of a particular period should be charged against that revenue to determine the net income.a)Conservatismb)Business entityc)Accounting periodd)MatchingCorrect answer is option 'D'. Can you explain this answer? in English & in Hindi are available as part of our courses for Commerce.
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