Basic Principles of Managerial and Financial Accounting Essay Example

their market value. Another important principle is the revenue principle, which dictates that organizations should record revenue when it becomes realizable or has been realized. Additionally, the revenue principle calls for recording revenue when it is received, as opposed to when cash is accepted. This accounting system is known as accrual basis accounting.

The matching principle in accounting is another fundamental rule that calls for harmonizing costs and revenues, as long as it is reasonable to do so. It is important to highlight that this principle requires recognizing costs not when the work or product is finished, but when a contribution is made to the returns. By doing so, it allows for a more thorough evaluation of productivity and performance, as it specifies the amount spent to earn a particular revenue. The matching principle is most applicable in scenarios involving depreciation and "cost of goods sold."