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what is the importance of reporting transactions in the correct period for an accrual based business

what is the importance of reporting transactions in the correct period for an accrual based business
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Answer #1

ANSWER  MATCHING PRINCIPLE

AS PER MATCHING CONCEPT, ALL REVENUE AND EPENSES MUST BE REPORTED IN THE PERIOD IN WHICH THEY OCCUR, IRRESPECTIVE OF WHEN THEY ARE RECEIVED / PAID.

SINCE WHEN A REVENUE HAS BEEN RECOGNISED IN THE PARTICULAR PERIOD, THE ACCOMODATING EXPENES TO EARN THOSE REVENUE SHOULD ALSO BE RECORED IN THE SAME ACCOUNTING PERIOD.

ALSO THE REVENUE/ EXPENSES WHICH ARE NOT PERTAINING TO SPECIFIC ACCOUNTING PERIOD IN WHICH INCURRED, WERE BEING REPORTED AS ACCRUED/ UNEARNED IN THAT ACCOUNTING PERIOD.

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