Matching Concept:
According to this concept, in order to calculate the profit for the accounting period in a correct manner, the expenses and costs incurred during that period, whether paid or not, should be matched with revenues generated during that period.
Materiality Concept:
According to this concept, while accounting for the various transactions, only those which are having material impact on profitability or financial position of the organisation will be considered, ignoring the insignificant ones e.g. if an organisation purchases some postage stamps some of which remain non-used at the end of the accounting period, according to matching concept, the cost of such non-used stamps should not be treated as an item of expenditure. However, as its impact on profitability is likely to be negligible, the cost of non-used stamps may be ignored treating the cost of purchase of stamps as expenditure. Now which transactions should be treated as material ones is a subjective concept and depends upon the judgement and knowledge of the accountant.
Consistency Concept:
According to this concept, whatever accounting policies and procedures are adopted, they should be adopted consistently from one period to another to enable the comparison between two different sets of financial statements. If there is any change in the accounting policies and procedure, this fact coupled with its effect on profitability should be disclosed specifically.
No comments:
Post a Comment