Matching Concept

This concept only makes the entire accounting system as meaningful to determine the
volume of earnings or losses of the firm at every level of transaction; which is an
outcome of matching in between the revenues and expenses. The worth of the transaction is identified through matching of revenues which are mainly generated from the sales volume and the expenses of the firm at every level. For example, the cost of goods sold and selling price of the pen of ABC Ltd are Rs. 5 and Rs. 10 respectively. The firm produced 100 ball pens during the first shift and out of 100 pens manufactured 20 pens are considered to be damage which cannot be supplied to the customers, rejected by the quality circle department. There was an order from the firm XYZ Ltd., which amounted 80 pens to be supplied immediately.
The worth of the transaction of the firm at every level of the transaction is being studied
only through the matching of revenues with the expenses. At first instance, the firm produced 100 pens which incurred the total cost of Rs 500 required to match with the expected revenues of Rs 1,000; illustrated the level of profit how much would it accrue if the entire level of production is sold out ? If the entire production capacity is sold out in the market the profit level would be Rs 500. Out of the 100 pens manufactured 20 were identified not ideal for supply as damages, the remaining 80 pens were supplied to the individual retailer The retailer has been dispatched 80 pens amounted Rs 400 which equated to Rs 800 of the expected sales At the moment of dispatching, the firm expected to earn a profit of Rs 400 at the level of 80 pens supplied. After the dispatch, the retailer found that 50 pens are in accordance with the order placement but the remaining are to the tune of the retailers' specifications. Finally, the retailer has agreed to make the payment of the bill only in accordance with the order placed which
amounted Rs 500 out of the expenses of the manufacturer Rs 250. This concept facilitates to identify the worth of the transaction at every moment.

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