Commercial Applications
According to this principle, cost of a particular period should be charged from the revenue of same period only.
- Matching principle
- Principle of full disclosure
- Dual aspect principle
- Realisation concept
GAAP
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Answer
Matching principle
Reason — The Matching Principle states that the cost of a particular period should be matched against the revenue of the same period to reveal the true profit or loss. All costs applicable to the revenue of a period must be charged against that revenue.
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Related Questions
This principle suggests that every debit has a corresponding and equal credit.
- Matching principle
- Principle of full disclosure
- Dual aspect principle
- Realisation concept
According to this principle, accounts should be prepared in such a way that all the material information required by users of financial statements is clearly disclosed.
- Matching principle
- Principle of full disclosure
- Dual aspect principle
- Realisation concept
Assertion (A): According to the Prudence Principle, the valuation of Closing Stock is based on either its cost price or its net realizable value, whichever is lower.
Reason (R): This practice ensures that a business firm does not present a more favourable financial position than what it actually is.
- A is true but R is false
- A is false but R is true
- Both A and R are true and R explains A.
- Both A and R are true but R does not explain A.
This principle states that accounting procedures and methods should remain consistent from one year to another.
- Materiality
- Consistency
- Conservatism
- Timeliness