Question A1a)
The matching principle indicates that expenses should be matched with revenues. When expenses are matched with revenues, they are not recognized until the associated revenue is also recognized.
Depreciation is another example of the matching principle. The cost of purchasing a fixed asset is spread over the period in which it is expected to generate revenue.
b) Depreciation is the reduction in the value of an asset from wear-and-tear or obsolescence. Depreciation allowance encourages companies to invest in new equipment. For accountants, it gives a proper match of the cost of using the asset to the current revenues by periodic allocation of the original cost to expenses over the life of the asset.
Reference : http://www.investorglossary.com/depreciation.htm
http://www.wikipedia.com/accoutingprinciple.htm
Money is used in final settlement of a debt and as a ready store of value. Its different functions are associated with different empirical measures of the money supply. Since most modern economic systems are regulated by governments through monetary policy, the supply of money is broken down into types of money based on how much of an effect monetary policy can have on each. Narrow measures include those more directly affected by monetary policy, whereas broader measures are less closely related to monetary-policy actions.[6] Each measure can be classified by placing it along a spectrum between narrow and broad monetary aggregates. The different types of money are typically classified as Ms. The number of Ms usually range from M0 (narrowest) to M3 (broadest) but which Ms are actually used depends on the system. The typical layout for each of the Ms is as follows:
M0: P ...