Basic Accounting Terms

• Accounts Payable. Accounts payable refers to the money a business owes to its suppliers, vendors, or creditors for goods or services bought on credit.
• Accounts Receivable.
• Accounting Period.
• Accruals.
• Accrual Basis Accounting.
• Assets.
• Balance Sheet.
• Capital.

What is matching in finance?

Matching is a cash flow immunization strategy used to safeguard the funding of future liabilities when due. The goal is to obtain fixed-income securities whose payments line up with liability outflows.

What is matching principle in accrual accounting?

In accrual accounting, the matching principle instructs that an expense should be reported in the same period in which the corresponding revenue is earned, and is associated with accrual accounting and the revenue recognition principle states that revenues should be recorded during the period in which they are earned.

Why is the matching concept important in accounting?

Importance of matching concept: Matching concept is a vital concept for companies for the sake of reporting their financial results correctly. Its main purpose is to avoid any possibility of misstatement of profits for a period. As matched expenses and revenues work under the basic equation of the “Income Statement”:

Where does the matching principle appear on the balance sheet?

The matching principle directs a company to report an expense on its income statement in the period in which the related revenues are earned. Further, it results in a liability to appear on the balance sheet for the end of the accounting period.

Which is an example of an accounting term?

It is a very important term in accounting terminology. It is a cash convertible property that one owns. For example, land, buildings, cash in bank accounts are all assets. There are broadly two types of assets – current asset and fixed asset.

When to report an expense under the matching principle?

The matching principle directs a company to report an expense on its income statement in the period in which the related revenues are earned.