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Is it true that:
1. Accrual accounting states that we should record income and expense in the year in which they are earned or incurred irrespective when the cash will be received or paid (either this year or next year)
2. What is matching concept in accounting and what is its relevancy?
1. Yes.
2. The matching concept means the same as the accruals concept, which is explained in Chapter 19 of our lecture notes and our lectures working through this chapter.
Relating to question (2).
Matching concept is when the revenues and their related expenses are recorded in the same accounting period in which they occur.
We recognize the revenues and their related expenses as soon as they occur which follows the same approach as accrual accounting.
Accrual accounting is unlike cash accounting where we record the transaction when the cash is received or paid.
All correct? Is that all we need to learn about them?
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