ACC 111 lesson 3 - Lesson 3 Revenue Recognition and Matching Principle Accounting explained to a five year-old is an accountants job is to put business

ACC 111 lesson 3 - Lesson 3 Revenue Recognition and...

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Lesson 3: Revenue Recognition and Matching Principle. Accounting explained to a five year-old is an accountants job is to put busi- ness entries in the right places so the company employees know how the company is doing and if they should change anything in the future. Accoun- tants need a way to recognize which transactions go where. To do this, they follow the revenue recognition principle and matching principle. "The revenue recognition principle tells accountants when to record the fol- lowing things: when to record revenue (make a journal entry for revenue) and the amount of revenue to record" (Noble, 136) This principle requires ac- countants to record revenue not during, not before, but only after that rev- enue has been earned. This means when the credit has been payed and the business has been paid in full in cash. The Matching Principle (can also be called the Expense Recognition Princi- ple.) is solely for expenses. For this principle, the accountant records ex- penses only when they are incurred during the period, and these expenses

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