theory for Wa1

Question 1

matching theory

Answer 1

according to the matching theory, costs incurred during the operation of a business to generate revenue and other income must be matched against revenue and other income earned in the same accounting period to determine profit for the period

Question 2

Accrual basis of accounting

Answer 2

The accrual basis of accounting states that
i. income is recorded in the financial period that it is earned, regardless of when cash or cheque is received
ii. expenses are recorded in the financial period that they are incurred, regardless of when cash or cheque is paid