During the year 2006, Mr. X purchased goods for Rs. 5, 00, 000 and sold 3/5^th of the goods for Rs. 5, 00, 000 and met expenses amounting Rs. 1, 50, 000. He counted net profit as Rs. 50, 000. Which of the accounting concept was followed by him?

Mr. X is following the matching principle, which requires matching expenses of a period with revenues of the same period. He sold 3/5th of goods for Rs. 5,00,000, so COGS is 3/5 of Rs. 5,00,000 = Rs. 3,00,000. Sales (Rs. 5,00,000) - COGS (Rs. 3,00,000) - Expenses (Rs. 1,50,000) = Rs. 50,000 profit. The expenses are matched against the revenue they helped generate.