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Chapter 4•Revenue Recognition Principle= states that revenue is to be recognized in the accounting period in which it is earned. (to recognize means to record a journal entry)•Matching Principle= states that expenses (efforts) must be matched with revenues (accomplishments).oIf a company performs services and thus earns revenue in a given accounting period, then any expenses which helped the company earn the revenue must be recorded in that same accounting period. oCritical Issue= determining when the expense makes its contribution to revenue•Accrual Basis Accounting= means that transactions that change a company’s financial statements are recorded in the periods in which the events occur, rather than in the periods in which the company receives cashoResulting from application of the revenue recognition and matching principles•Cash Basis Accounting= revenue is recorded only when cash is received, and an expense is recorded only when cash is paid.