Define Matching Concept? Give Reason Why a Business Concern Should follow this Concept

By BYJU'S Exam Prep

Updated on: November 14th, 2023

The Matching concept in accounting is defined as a practice where the business firms recognize the revenues earned and the expenses incurred to earn that revenue in the same accounting period. For example, following this concept, depreciation on an asset is deducted on a yearly basis over the life of the asset instead of deducting the entire value of the asset at once after its retirement.

What is a Matching Concept?

The Matching concept is an accounting practice that every business concern should follow. This concept basically refers to the system where the expenses are stated while the accounting practice should match the revenue earned.

  • It also 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.

Why a Business Concern should follow the Matching Concept?

The Matching Concept was introduced and adopted in order to avoid the wrongful presentation of earnings during a specific period. Other reasons why a business concern should follow the matching concept are given below:

  • 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.

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