Lesson 3 - Revenue Recognition & Matching Principle - The realm of accounting is made up of several principals such as the revenue recognition

Lesson 3 - Revenue Recognition & Matching Principle - The...

This preview shows page 1 out of 1 page.

The realm of accounting is made up of several principals such as the revenue recognition principle and that matching principle. These principals help determine when both revenue and expenses are incurred. Without following these principles, the field of accounting would have so much less to base financial reports off of and businesses would have a difficult time interpreting overall incomes and loses. The revenue recognition principle “requires companies to record revenue when it has been earned and determines the amount of revenue to record” (Nobels/Mattison/Matsumara pg.136). This principle is something all companies must follow. With the revenue recognition principle, there are a few catches that make it more difficult for companies to falsify earnings, while also making it harder to recognize when earnings have been made. It makes it so companies cannot record revenue before it has been earned. As stated in Horngren’s Accounting, “revenue has been earned when the business has delivered

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture