Download PDF of Solved Example of Matching Principle in Accounting

 Welcome back to our blog today we are going to solve examples of matching concepts in accounting so if you are an accounting student then you should solve some questions and clear your basics for matching principles in accounting.

Solved Example of Matching Principle in Accounting

What is the matching concept?

The matching concept, also known as the matching principle, is a fundamental accounting principle that states that expenses should be recognized in the same accounting period as the revenues they help generate.

• Topics in which questions can be asked:

• Salaries and Wages

• Depreciation

• Utilities

• Cost of Goods Sold (COGS)

• Advertising Expenses

• Interest Expenses

• Income Taxes

• Provision for Bad Debts

• Insurance Premiums

• Rent

Now let's check some matching principle examples in accounting.

Matching Concept Examples In Accounting

Example 1: Certainly! Let's walk through a simple example of salaries and wages for a fictional company called "XYZ Marketing Agency" for the month of October.

• Information:

XYZ Marketing Agency has two employees: Alice and Bob.

Alice's monthly salary is 4,000.

Bob's monthly salary is 3,500.

The agency generated 12,000 in revenue in the month of October.

Solution:

• Step 1: Recognition of Salaries and Wages Expense:

Alice's Salary Expense: 4,000

Bob's Salary Expense: 3,500

These expenses are recognized in the month of October because Alice and Bob have worked during this period, and their salaries need to be accounted for in the same month.

• Step 2 : Matching with Revenue:

Now, let's see how these salary expenses are matched with the revenue generated in October:

Total Salary Expense = Alice's Salary Expense + Bob's Salary Expense

• Total Salary Expense = 4,000 + 3,500 = 7,500

• The total salary expense for October is 7,500.

Since XYZ Marketing Agency generated 12,000 in revenue during the same month, we can see that the salary expenses of 7,500 match the income of 12,000 for October.

• Step 3: Profit Calculation:

To calculate the profit for the month of October, we subtract the total expenses (including salaries) from the total revenue:

Total Revenue: 12,000

Total Expenses (including Salaries): 7,500

Profit = Total Revenue - Total Expenses

Profit = 12,000 - 7,500 = 4,500

XYZ Marketing Agency made a profit of 4,500 in the month of October after accounting for all expenses, including salaries and wages.

More examples of salary and wages

• Question 2: Inventory Valuation

ABC Electronics, a retail store, wants to determine the value of its inventory at the end of the fiscal year, which is December 31, 2023. The company has the following information:

Beginning inventory on January 1, 2023: 50,000

Purchases of inventory throughout the year: 120,000

Sales of inventory throughout the year: 140,000

Ending inventory as of December 31, 2023: ???

Calculate the value of ABC Electronics' ending inventory as of December 31, 2023, using the perpetual inventory system.

• Question 3: Depreciation Calculation

XYZ Manufacturing Company purchased a new piece of machinery for 100,000 on January 1, 2020. The estimated useful life of the machinery is 10 years, with a salvage value of 10,000. Calculate the annual depreciation expense for the machinery using the straight-line depreciation method for the fiscal years 2020, 2021, and 2022.

Conclsuion

Here in this post, we add some examples of matching concepts in accounting so if you are thinking of clearing your matching principle of accounting Then you should read this post till the end and solve some questions on it.