Accounting Principles PDF
Document Details
Uploaded by CohesiveSkunk
Tags
Summary
This document discusses the main objective of accounting, which is to ascertain the results of operations and the financial position of a business. It also explains the matching principle and how expenses and revenues are matched, differentiating between revenue and capital expenditures. The document highlights the importance of allocating capital and revenue items for a true and fair view of profitability.
Full Transcript
The main objective of accounting of business transactions is to ascertain the results of operations and the financial position of the business concern. The transactions carried on may yield benefit only for the current accounting period or they may yield benefit for more than one accounting perio...
The main objective of accounting of business transactions is to ascertain the results of operations and the financial position of the business concern. The transactions carried on may yield benefit only for the current accounting period or they may yield benefit for more than one accounting period. According to matching principle, the expenses incurred in the current accounting period must be matched with the revenues earned during that period. In case of certain expences, the benefit accrues only in the relevant accounting period. They are called revenue expenditrues. For example, salaries, rent, etc. But in case of certain expenditrues benefit extends beyond one accounting period. They are called capital expenditrues. To exhibit a true and fair view of profitability and state of affairs, proper allocation of capital and revenue items is required. The revenue items are to be shown in the trading and profit and loss account and capital items are to be shown in the balance sheet.
