Accounting Principles 5, 6, and 7 Description
Basic accounting principles are both generally held and regulated under Generally Accepted Accounting Principles (GAAP). The Financial Accounting Standards Board (FASB) also provides rulings and general practices with regard to these accounting principles. Some of these principles of accounting also contain underlying concepts or methods that may be used as it pertains to that company’s particular industry or business venture. Let’s look at the Revenue Principle, the Matching Principle, and the Disclosure Principle
The Revenue Principle, also known as the Revenue Recognition Principle, contains several different methods regarding the timing and amount to record as revenue. In accordance with this, meet the following three conditions for each and every sale. First, a company must have performed a service or provided a product to expect a return from the buying party. Then the amount of the sale should be readily measurable. Finally, there should be a reasonable amount of expectation that the company will receive payments. But to insure that this happens, the following six methods of accounting for revenue. which differ according to conditions that surround the business model, can be found below:
1) Sales Method
The matching principle is a way of setting the expenses of a company next to their respective revenues. Once you use one of the above revenue principle methods, then match up the incurred expenses during the same period that the revenue was recognized in the company. But by doing this, the company establishes that the income for the period revenue has been recognized.
Lastly, the disclosure principle states that a company’s financial statements need to and should contain enough information to outsiders so that they can make well informed decisions about a company. In most cases this is pretty straightforward, but for some policies, issues, and uncommon transactions the way in which a company should disclose information can become unclear. Include the following to cover the majority of issues and events within the financials as to avoid misleading investors.
Accounting Principles 1, 2, and 3
Continuous Accounting: The New Age of Accounting
Point of Sale (POS) Method
Generally Accepted Accounting Principles (GAAP)
Financial Accounting Standards Board (FASB)