Syllabus Edition
First teaching 2025
First exams 2027
Matching Costs & Revenues (Cambridge (CIE) IGCSE Accounting): Revision Note
Exam code: 0452 & 0985
Matching costs & revenues
How do I record expenses and incomes in the statement of profit or loss?
The accounting principle of matching states that costs and revenues should be recorded for the financial period in which they are incurred
The value posted to the statement of profit or loss for an expense or income should be the amount invoiced for that period
The amount recorded in the statement of profit or loss might not be the same as the actual amount paid or received
The business might have paid or received more than required
This a prepayment
The business might have paid or received less than required
This is an accrual
What do I do if the period of an invoice does not match up with the financial period?
In an exam, you will likely be given information about an invoice for a period that does not fully align with the financial period
Only the amount for the current financial period should be posted to the statement of profit or loss
For example, consider the scenario and look at the table to see where the different amounts are posted
the financial period is from March 2023 to February 2024
an invoice is for January 2023 to July 2024
Amount for the period | Where the amount should be posted |
|---|---|
January 2023 to February 2023 | Last year's statement of profit or loss |
March 2023 to February 2024 | This year's statement of profit or loss |
March 2024 to July 2024 | Next year's statement of profit or loss |
How do I calculate the amount of an invoice to post to the statement of profit or loss?
STEP 1
Find the amount due per monthDivide the total amount by the number of months in the invoice period
STEP 2
Find the amount of the invoice that is due in that financial periodMultiply the amount per month by the number of months that are also in the financial period
There might be multiple invoices which cover the financial period
Find the amount of each which is due in the financial statement
Add these amounts together to get the total amount due
Examiner Tips and Tricks
It can help to write out the months involved and identify which ones belong in the financial period.
Expense example
Worked Example
Soraia is a trader. Soraia pays her rent on 1 February each year for the following 12 months.
On 1 February 2023, she pays $6 420 for rent and on 1 February 2024 she pays $8 040 for rent.
How much should Soraia include for rent in her statement of profit or loss for the year ended 30 April 2024?
Answer:
The invoice period is from February 2023 to January 2024
The financial period is from May 2023 to April 2024
Current financial period | |||||||||||||||||||||||
F | M | A | M | J | J | A | S | O | N | D | J | F | M | A | M | J | J | A | S | O | N | D | J |
$6 420 rent for the year | $8 040 rent for the year | ||||||||||||||||||||||
$6 420 is for the 12 months from February 2023 to January 2024
Only amounts due between May 2023 and January 2024 are included in the financial period
STEP 1: Divide by 12 to find the monthly expense
$6 420 ÷ 12 = $535
STEP 2: Find the part of this payment to be included in the statement of profit or loss
9 months (M-J-J-A-S-O-N-D-J)
$535 × 9 = $4 815
$8 040 is for the 12 months from February 2024 to January 2025
Only amounts due between February 2024 and April 2024 are included in the financial period
STEP 1: Divide by 12 to find the monthly expense
$8 040 ÷ 12 = $670
STEP 2: Find the part of this payment to be included in the statement of profit or loss
3 months (F-M-A)
$670 × 3 = $2 010
Add the two values together to find the amount for the statement of profit or loss
$4 815 + $2 010 = $6 825
Income example
Worked Example
Tomas is a trader. Tomas receives payment for commission on 1 March each year for the following 12 months.
On 1 March 2023, he receives $3 000 commission and on 1 March 2024 he receives $3 300 commission.
How much should Tomas include for commission in his statement of profit or loss for the year ended 30 April 2024?
Answer:
The invoice periods are
from March 2023 to February 2024
from March 2024 to February 2025.
The financial period is from May 2023 to April 2024
Current financial period | |||||||||||||||||||||||
M | A | M | J | J | A | S | O | N | D | J | F | M | A | M | J | J | A | S | O | N | D | J | F |
$3 000 commission for the year | $3 300 commission for the year | ||||||||||||||||||||||
$3 000 is for the 12 months from March 2023 to February 2024
Only May 2023 to February 2024 is included in the financial period
STEP 1: Divide by 12 to find the monthly payment
$3 000 ÷ 12 = $250
STEP 2: Find the part of the total payment to be included in the statement of profit or loss
10 months (M-J-J-A-S-O-N-D-J-F)
$250 × 10 = $2 500
$3 300 is for the 12 months from March 2024 to February 2025
Only March 2024 to April 2024 is included in the financial period
STEP 1: Divide by 12 to find the monthly payment
$3 300 ÷ 12 = $275
STEP 2: Find the part of the total payment to be included in the statement of profit or loss
2 months (M-A)
$275 × 2 = $550
Add the two values together to find the amount for the statement of profit or loss
$2 500 + $550 = $3 050
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