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Question
Why should a business concern follow the matching concept?
Solution
On the basis of this concept, adjustments are made for outstanding and prepaid expenses and accrued and unearned revenues. Also, due provisions are made for depreciation of the fixed assets, bad debts, etc., relating to the accounting period. Thus, it matches the revenues earned during an accounting period with the expenses incurred during that period to earn the revenues before sharing any profit or loss.
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