Matching Entries Mystery

📌 CONCEPT: To rectify the situation where accounting assistant mistakenly recorded transactions in a haphazard manner, we need to follow the principle of 'Matching Principle' which states that the expense is matched with revenue and not the timing of recording of transactions.

📐 RULE / FORMULA: The accounting assistant should match the 'Sale of bicycle for ₹1,20,000' with the 'Purchase of bicycle for ₹80,000' by debiting 'Purchase of bicycle account' and crediting 'Sales account' and then 'Sale of bicycle account'.

💡 WORKED EXAMPLE: Let's say the transaction date is 1st January 2024. The correct recording of transactions would be: Debit Purchase of Bicycle Account = ₹80,000 Credit Sales Account = ₹1,20,000 Then, debit Sales Account and credit Bank Account for the sale amount.

⚠️ COMMON MISTAKE: Students usually get confused by not applying the matching principle correctly, i.e., they record the transactions in the order they occurred instead of matching the expenses with revenues.