The correct answer is: C. 1 and 3 are correct
The realisation concept states that revenue should be recognised when it is realised or realisable, and expenses should be recognised when they are incurred. The cost concept states that assets should be recorded at their cost, and that this cost should be used to depreciate the asset over its useful life. The matching concept states that expenses should be matched with the revenues they generate. The accounting equivalence concept states that the financial statements should present a true and fair view of the company’s financial position and performance.
Of the four concepts listed, only the realisation concept and the matching concept are directly related to the balance sheet. The cost concept is related to the income statement, and the accounting equivalence concept is a general concept that applies to all financial statements.
The realisation concept is important because it ensures that revenue is only recognised when it is certain that it will be received. This helps to prevent companies from overstating their profits. The matching concept is important because it ensures that expenses are matched with the revenues they generate. This helps to provide a more accurate picture of the company’s profitability.