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Sohan purchased goods for Rs.18,00,000 and sold 4/5th of the goods for Rs.21,60,000 and met expenses amounting to Rs.3,00,000 during the year, 2015. He counted net profit as Rs.4,20,000. Which of the accounting concepts was followed by him?
- a)Entity.
- b)Periodicity.
- c)Matching.
- d)Conservatism
Correct answer is option 'C'. Can you explain this answer?
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Sohan purchased goods for Rs.18,00,000 and sold 4/5th of the goods for...
Matching Concept in Accounting
The matching concept is an accounting principle that requires the matching of expenses with revenues earned during an accounting period. It states that the expenses incurred in generating revenue should be recognized in the same period as the corresponding revenue. In simpler terms, it means that the expenses incurred to earn revenue should be matched with that revenue in the same accounting period.
Application of Matching Concept in the Given Scenario
In the given scenario, Sohan purchased goods worth Rs.18,00,000 and sold 4/5th of the goods for Rs.21,60,000. He also incurred expenses amounting to Rs.3,00,000 during the year, 2015. Based on these transactions, he calculated his net profit as Rs.4,20,000.
Here, Sohan has followed the matching concept of accounting as he has matched the expenses of Rs.3,00,000 with the revenue earned from the sale of goods worth Rs.21,60,000. He has not considered the entire cost of goods purchased (Rs.18,00,000) as an expense in the year 2015, but only the portion of it that was sold (4/5th). This is because the remaining 1/5th of the goods is still in stock and will be sold in the future accounting periods.
If Sohan had considered the entire cost of goods purchased as an expense, his net profit would have been lower, and it would not have been a true reflection of the profitability of his business in the year 2015. Hence, by following the matching concept, Sohan has provided a more accurate picture of his business's financial performance in the year 2015.
The matching concept is an accounting principle that requires the matching of expenses with revenues earned during an accounting period. It states that the expenses incurred in generating revenue should be recognized in the same period as the corresponding revenue. In simpler terms, it means that the expenses incurred to earn revenue should be matched with that revenue in the same accounting period.
Application of Matching Concept in the Given Scenario
In the given scenario, Sohan purchased goods worth Rs.18,00,000 and sold 4/5th of the goods for Rs.21,60,000. He also incurred expenses amounting to Rs.3,00,000 during the year, 2015. Based on these transactions, he calculated his net profit as Rs.4,20,000.
Here, Sohan has followed the matching concept of accounting as he has matched the expenses of Rs.3,00,000 with the revenue earned from the sale of goods worth Rs.21,60,000. He has not considered the entire cost of goods purchased (Rs.18,00,000) as an expense in the year 2015, but only the portion of it that was sold (4/5th). This is because the remaining 1/5th of the goods is still in stock and will be sold in the future accounting periods.
If Sohan had considered the entire cost of goods purchased as an expense, his net profit would have been lower, and it would not have been a true reflection of the profitability of his business in the year 2015. Hence, by following the matching concept, Sohan has provided a more accurate picture of his business's financial performance in the year 2015.
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Sohan purchased goods for Rs.18,00,000 and sold 4/5th of the goods for...
Option C is correct sales=2160000 cost of goods sold =1800000×4/5=1440000. actual profit=720000-300000(expenses). =420000. here current year expenses are matched with the current year revenue. so matching is followed.
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Sohan purchased goods for Rs.18,00,000 and sold 4/5th of the goods for Rs.21,60,000 and met expenses amounting to Rs.3,00,000 during the year, 2015. He counted net profit as Rs.4,20,000. Which of the accounting concepts was followed by him?a)Entity.b)Periodicity.c)Matching.d)ConservatismCorrect answer is option 'C'. Can you explain this answer?
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Sohan purchased goods for Rs.18,00,000 and sold 4/5th of the goods for Rs.21,60,000 and met expenses amounting to Rs.3,00,000 during the year, 2015. He counted net profit as Rs.4,20,000. Which of the accounting concepts was followed by him?a)Entity.b)Periodicity.c)Matching.d)ConservatismCorrect answer is option 'C'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about Sohan purchased goods for Rs.18,00,000 and sold 4/5th of the goods for Rs.21,60,000 and met expenses amounting to Rs.3,00,000 during the year, 2015. He counted net profit as Rs.4,20,000. Which of the accounting concepts was followed by him?a)Entity.b)Periodicity.c)Matching.d)ConservatismCorrect answer is option 'C'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Sohan purchased goods for Rs.18,00,000 and sold 4/5th of the goods for Rs.21,60,000 and met expenses amounting to Rs.3,00,000 during the year, 2015. He counted net profit as Rs.4,20,000. Which of the accounting concepts was followed by him?a)Entity.b)Periodicity.c)Matching.d)ConservatismCorrect answer is option 'C'. Can you explain this answer?.
Sohan purchased goods for Rs.18,00,000 and sold 4/5th of the goods for Rs.21,60,000 and met expenses amounting to Rs.3,00,000 during the year, 2015. He counted net profit as Rs.4,20,000. Which of the accounting concepts was followed by him?a)Entity.b)Periodicity.c)Matching.d)ConservatismCorrect answer is option 'C'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about Sohan purchased goods for Rs.18,00,000 and sold 4/5th of the goods for Rs.21,60,000 and met expenses amounting to Rs.3,00,000 during the year, 2015. He counted net profit as Rs.4,20,000. Which of the accounting concepts was followed by him?a)Entity.b)Periodicity.c)Matching.d)ConservatismCorrect answer is option 'C'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Sohan purchased goods for Rs.18,00,000 and sold 4/5th of the goods for Rs.21,60,000 and met expenses amounting to Rs.3,00,000 during the year, 2015. He counted net profit as Rs.4,20,000. Which of the accounting concepts was followed by him?a)Entity.b)Periodicity.c)Matching.d)ConservatismCorrect answer is option 'C'. Can you explain this answer?.
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Sohan purchased goods for Rs.18,00,000 and sold 4/5th of the goods for Rs.21,60,000 and met expenses amounting to Rs.3,00,000 during the year, 2015. He counted net profit as Rs.4,20,000. Which of the accounting concepts was followed by him?a)Entity.b)Periodicity.c)Matching.d)ConservatismCorrect answer is option 'C'. Can you explain this answer?, a detailed solution for Sohan purchased goods for Rs.18,00,000 and sold 4/5th of the goods for Rs.21,60,000 and met expenses amounting to Rs.3,00,000 during the year, 2015. He counted net profit as Rs.4,20,000. Which of the accounting concepts was followed by him?a)Entity.b)Periodicity.c)Matching.d)ConservatismCorrect answer is option 'C'. Can you explain this answer? has been provided alongside types of Sohan purchased goods for Rs.18,00,000 and sold 4/5th of the goods for Rs.21,60,000 and met expenses amounting to Rs.3,00,000 during the year, 2015. He counted net profit as Rs.4,20,000. Which of the accounting concepts was followed by him?a)Entity.b)Periodicity.c)Matching.d)ConservatismCorrect answer is option 'C'. Can you explain this answer? theory, EduRev gives you an
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