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Mohan purchased goods for Rs.15,00,000 and sold 4/5th of the goods amounting Rs.18,00,000 and met expenses amounting Rs.2,50,000 during the year, 2005. He counted net profit as Rs.3,50,000. Which of the accounting concept 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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Mohan purchased goods for Rs.15,00,000 and sold 4/5th of the goods amo...
The matching concept is an accounting practice whereby firms recognize revenues and their related expenses in the same accounting period. Firms report "revenues," that is, along with the "expenses" that brought them. The purpose of the matching concept is to avoid misstating earnings for a period.
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Mohan purchased goods for Rs.15,00,000 and sold 4/5th of the goods amo...
Matching Concept:
The matching concept is a fundamental accounting principle that requires expenses to be recognized in the same period as the related revenue. This concept ensures that the financial statements accurately reflect the results of operations for a specific period.
Explanation:
In this scenario, Mohan purchased goods for Rs. 15,00,000 and sold 4/5th of the goods amounting to Rs. 18,00,000. He also incurred expenses amounting to Rs. 2,50,000 during the year.
To determine the net profit, Mohan subtracted the expenses from the revenue generated from the sale of goods. The net profit is calculated as Rs. 18,00,000 (revenue) - Rs. 2,50,000 (expenses) = Rs. 15,50,000.
However, the question states that Mohan counted the net profit as Rs. 3,50,000. This implies that he followed the matching concept, which requires expenses to be matched with the revenue they helped generate.
In this case, Mohan did not consider all the expenses incurred during the year. By only accounting for Rs. 2,50,000 in expenses, he effectively matched a smaller amount of expenses with the revenue of Rs. 18,00,000, resulting in a higher net profit of Rs. 3,50,000.
This approach violates the matching concept, as it does not accurately reflect the expenses incurred to generate the revenue. It distorts the financial statements by understating expenses and overstating net profit.
Therefore, the accounting concept followed by Mohan in this scenario is the matching concept.
The matching concept is a fundamental accounting principle that requires expenses to be recognized in the same period as the related revenue. This concept ensures that the financial statements accurately reflect the results of operations for a specific period.
Explanation:
In this scenario, Mohan purchased goods for Rs. 15,00,000 and sold 4/5th of the goods amounting to Rs. 18,00,000. He also incurred expenses amounting to Rs. 2,50,000 during the year.
To determine the net profit, Mohan subtracted the expenses from the revenue generated from the sale of goods. The net profit is calculated as Rs. 18,00,000 (revenue) - Rs. 2,50,000 (expenses) = Rs. 15,50,000.
However, the question states that Mohan counted the net profit as Rs. 3,50,000. This implies that he followed the matching concept, which requires expenses to be matched with the revenue they helped generate.
In this case, Mohan did not consider all the expenses incurred during the year. By only accounting for Rs. 2,50,000 in expenses, he effectively matched a smaller amount of expenses with the revenue of Rs. 18,00,000, resulting in a higher net profit of Rs. 3,50,000.
This approach violates the matching concept, as it does not accurately reflect the expenses incurred to generate the revenue. It distorts the financial statements by understating expenses and overstating net profit.
Therefore, the accounting concept followed by Mohan in this scenario is the matching concept.
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Mohan purchased goods for Rs.15,00,000 and sold 4/5th of the goods amounting Rs.18,00,000 and met expenses amounting Rs.2,50,000 during the year, 2005. He counted net profit as Rs.3,50,000. Which of the accounting concept 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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Mohan purchased goods for Rs.15,00,000 and sold 4/5th of the goods amounting Rs.18,00,000 and met expenses amounting Rs.2,50,000 during the year, 2005. He counted net profit as Rs.3,50,000. Which of the accounting concept was followed by him?a)Entity.b)Periodicity.c)Matching.d)Conservatism.Correct 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 Mohan purchased goods for Rs.15,00,000 and sold 4/5th of the goods amounting Rs.18,00,000 and met expenses amounting Rs.2,50,000 during the year, 2005. He counted net profit as Rs.3,50,000. Which of the accounting concept was followed by him?a)Entity.b)Periodicity.c)Matching.d)Conservatism.Correct 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 Mohan purchased goods for Rs.15,00,000 and sold 4/5th of the goods amounting Rs.18,00,000 and met expenses amounting Rs.2,50,000 during the year, 2005. He counted net profit as Rs.3,50,000. Which of the accounting concept was followed by him?a)Entity.b)Periodicity.c)Matching.d)Conservatism.Correct answer is option 'C'. Can you explain this answer?.
Mohan purchased goods for Rs.15,00,000 and sold 4/5th of the goods amounting Rs.18,00,000 and met expenses amounting Rs.2,50,000 during the year, 2005. He counted net profit as Rs.3,50,000. Which of the accounting concept was followed by him?a)Entity.b)Periodicity.c)Matching.d)Conservatism.Correct 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 Mohan purchased goods for Rs.15,00,000 and sold 4/5th of the goods amounting Rs.18,00,000 and met expenses amounting Rs.2,50,000 during the year, 2005. He counted net profit as Rs.3,50,000. Which of the accounting concept was followed by him?a)Entity.b)Periodicity.c)Matching.d)Conservatism.Correct 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 Mohan purchased goods for Rs.15,00,000 and sold 4/5th of the goods amounting Rs.18,00,000 and met expenses amounting Rs.2,50,000 during the year, 2005. He counted net profit as Rs.3,50,000. Which of the accounting concept 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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