Reversal of profits declared in earlier years on account of...

Reversal of profits declared in earlier years on account of estimated loss expected - valuation of work in progress (WIP) - The matching principle requires recording expenses in the same accounting period in which the revenues were earned as a result of the expenses. Expense recognition, similar to revenue recognition, has a balance sheet effect. - The action of the assessee upsets the applecart of mercantile system of accounting, the matching principles.