What is the difference between conservatism concept and matching concept? Doesn't it be contradictory?

Matching Concept contradicts with Conservatism Concept on the matter of charging future possible losses from revenues. Conservatism Concept favours for deducting all anticipated losses whether they are relating to the current revenue or future revenue. On the contrary, Matching Concept favours only deduction of those losses and expenses which relate to current revenue and denies to the adjustment of losses relating to future revenue.   

Conservatism concept is applied for considering all possible losses against revenues of current period. It is indifferent  these losses either matching with current revenue or future revenue. However, Matching Concept states that only those expenses and losses will be charged against the revenue which have been incurred to earn the revenue. In other words losses and expenses (whether actual or possible) must be charged against their related (matching) revenue.

For example, there is a possibility of amount unrecovered (bad debt) from a few debtors of the current period. If this loss actually occurs, it will affect the revenue receivable from debtors. Consequently profit of current period may be affected due to this loss. In real terms, this is not actual loss. However, it will be charged against the current revenues as per Conservatism Concept and Matching Concept as well because this possible loss is matching with the revenue realizable for the current period.   

On the other hand, Conservatism Concept also favours deduction of all possible losses matching to the future revenue against the revenue of the current period. According to this concept, if market price of the closing stock is less than its original cost, closing stock must be valued at market price. At the time of ascertaining profit, loss in value of closing stock would be adjusted against the  revenue of current period. However, this loss would occur in future, when this stock would be sold at price less than its cost price. 

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Matching Concept tells that for knowing whether we have made profit or loss, revenue should be matched with that expense which is incurred for this revenue only. A revenue should not be compared with the expense incurred for earning some other revenue. Only then, we can determine the true profit or loss.


Convertism Concept tells recgnize all bad but no good. If you expect that your business can incur some loss/expense, then recognize it immediately. However, if you expect that your business can make some profit/revenue, then do not recognize that until it has actually been realised according to the Realisation Concept.

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