X Ltd., purchased goods for ` 5 lakh and sold 9/10th of the value of goods for ` 6 lakh. Net expenses during the year were ` 25, 000. The company reported its net profit as ` 75,000. Which of the following concept is violated by the company?

Question

Quizplus · Accepted Answer

The company violates the Matching Concept, which requires that expenses be matched with revenues in the period in which the revenue was earned. In this case, the company did not match the cost of goods sold (COGS) with the revenue from sales properly, leading to an incorrect net profit figure.

X Ltd, Purchased Goods for ` 5 Lakh and Sold 9/10th