Why a Business Concern should follow the Matching Concept?
The Matching concept is an accounting practice that every business concern should follow because of the following reasons:
- It reflects the actual financial position of the company.
- Through the matching concept, revenue and expenses are aligned with each other, so there is little chance of making or minimizing profit or loss.
- It portrays the revenue earned and expenses incurred in an accounting year in the same period itself whether they are accrued/outstanding.
- Expenses incurred to buy a capital expenditure that will benefit the business in the next few years cannot be charged in one accounting period, thus the Matching concept allows firms to charge the depreciation on an asset over its useful life.