— Kishore V, SME and ACW at Edumarz
Matching Concept:
Revenues within an accounting period are matched with costs incurred during that period, according to this principle.
The accrual and periodicity concepts are the foundations of this notion.
The idea of periodicity establishes a time limit for assessing performance and defining financial conditions.
Only costs about the accounting period are taken into account, not all expenses paid throughout the period.
Adjustments are made for outstanding and prepaid costs, as well as accrued and earned income, depending on this notion.
Depreciation for fixed assets, bad debt, and other accounting period expenses are also taken into consideration.
As a result, it compares the revenues produced during an accounting period to the expenses made during that period before sharing any profits or losses.
Full disclosure concept:
It indicates that the accounts must be presented honestly, with all relevant information revealed in the accounting statement.
This is significant since, in most businesses, management differs from the owners.
The disclosure should be complete and appropriate so that users of the financial statements may make an accurate assessment of the business unit’s financial situation and performance.