Accounting Theory and Practice
UNIVERSITI TENAGA NASIONAL
COLLEGE OF BUSINESS MANAGEMENT AND ACCOUNTING
DEPARTMENT OF ACCOUNTING
SUBJECT:
ACCOUNTING THEORY AND PRACTICE
PREPARE FOR:
DR.NORHAYATI MAT HUSIN
PREPARE BY:
NUR FADZILAH BT NORIZAN (AC086628)
NUR IZYAN BT MOHD ISHAK (AC086934)
NURUL AQILAH BT ZAMRI (AC085167)
THILAGA SEGARAN (AC086628)
BACHELOR IN ACCOUNTING (HONS)
CASE 1: WASTE MANAGEMENT
a) Define the matching principle and explain why it is important to users of financial statements.
Matching principle requires a company to match expenses with related revenues that they helped to generate in order to report a company's profitability. The matching is based on a cause and effect relationship. For example, sale is the cause that effect the present of the cost of goods sold expense and the sales commission expense. Other than that, expenses should be recognized when the costs can be matched to revenue that has been recorded. It is not necessarily to be recognized when the work is completed or a product is produced. The examples of situation are the advertising expense and research and development expense.
Matching principle is important to users of financial statements because the principle is the measure the profitability and performance of the company. This principle accounts for a company’s efforts (expenses) against the accomplishment (revenue) within a particular period of time. The matching principle promotes comparability which helps users evaluate the performance of the company because financial statements are periodic and this principle matched expenses and revenue in a specific time interval. According to this principle other costs not accounted are considered as assets or inventories which can later be recognized as revenues if the sales are made in future period. In other words, we recognize the expenses on the financial statements when we show the revenue that those expenses
COLLEGE OF BUSINESS MANAGEMENT AND ACCOUNTING
DEPARTMENT OF ACCOUNTING
SUBJECT:
ACCOUNTING THEORY AND PRACTICE
PREPARE FOR:
DR.NORHAYATI MAT HUSIN
PREPARE BY:
NUR FADZILAH BT NORIZAN (AC086628)
NUR IZYAN BT MOHD ISHAK (AC086934)
NURUL AQILAH BT ZAMRI (AC085167)
THILAGA SEGARAN (AC086628)
BACHELOR IN ACCOUNTING (HONS)
CASE 1: WASTE MANAGEMENT
a) Define the matching principle and explain why it is important to users of financial statements.
Matching principle requires a company to match expenses with related revenues that they helped to generate in order to report a company's profitability. The matching is based on a cause and effect relationship. For example, sale is the cause that effect the present of the cost of goods sold expense and the sales commission expense. Other than that, expenses should be recognized when the costs can be matched to revenue that has been recorded. It is not necessarily to be recognized when the work is completed or a product is produced. The examples of situation are the advertising expense and research and development expense.
Matching principle is important to users of financial statements because the principle is the measure the profitability and performance of the company. This principle accounts for a company’s efforts (expenses) against the accomplishment (revenue) within a particular period of time. The matching principle promotes comparability which helps users evaluate the performance of the company because financial statements are periodic and this principle matched expenses and revenue in a specific time interval. According to this principle other costs not accounted are considered as assets or inventories which can later be recognized as revenues if the sales are made in future period. In other words, we recognize the expenses on the financial statements when we show the revenue that those expenses