Difference between Prudence concept and matching concept

Matching concept requires that expenses incurred by an organization must be charged to the income statement in the accounting period in which the revenue, to which those expenses relate, is earned. Under the prudence concept, do not overestimate the amount of revenues recognized or underestimate the amount of expenses. You should also be conservative in recording the amount of assets, and not underestimate liabilities.

In matching concept, a major development from the application of matching principle is the use of depreciation in the accounting for non-current assets. Depreciation results in a systematic charge of the cost of a fixed asset to the income statement over several accounting periods spanning the asset’s useful life during which it is expected to generate economic benefits for the entity.  In prudence, the result should be conservatively-stated financial statements. The prudence concept does not quite go so far as to force you to record the absolute least favorable position (perhaps that would be entitled the pessimism concept!). Instead, what you are striving for is to record transactions that reflect a realistic assessment of the probability of occurrence. Thus, if you were to create a continuum with optimism on one end and pessimism on the other, the prudence concept would place you somewhat further in the direction of the pessimistic side of the continuum.

SEO Description: Difference between Prudence concept and matching concept Matching concept requires that expenses incurred by an organization must be charged to the income stat