My Essay Gives A Description Of The Cost Principle, Revenue Recognition Principle, Matching Principle And All Of There Differences, All The Work Is Cited And Refrenced

1235 words - 5 pages


Throughout this report I will explain the advantages, disadvantages and give examples of the Cost Principle, Matching Principle, as well as the Revenue Recognition principle, which are all Generally Accepted Accounting Principles used in today's financial world. Each of these individual principles is unique in their structure and purpose, and all have different applications in today's world of accounting. The Cost, Matching, and Revenue Recognition Principle's are all very different in the way they effect financial statements as well as other aspects of accounting.

The Cost Principle:

The Cost principle states that assets or anything that is purchased should be recorded on the books at cost. (Weygandt et al, Accounting Principles Second Canadian Edition, 581)

The Cost Principle requires assets and goods that have been purchased be recorded at cost, not market or current value. This can make accounting entries much simpler than they would be if you purchased something for a certain price, but recorded it at a different price on the books. Cost is a very relevant number because it represents the amount paid, or what assets were sacrificed in order to obtain what was purchased. Cost is also a very reliable number because it represents exactly what was paid at the date of acquisition, regardless of market value or what you feel you could sell the asset for. We use cost as the basis for preparing our financial statements because it is a Generally Accepted Accounting Principal that is reliable and relevant to the value of our assets. (Weygandt et al, Accounting Principles Second Canadian Edition, 575) (, December 20)

The value of assets however, does not always remain at cost. They can fluctuate due to such factors as inflation and depreciation. One way we compensate for this is by using amortization accounts. If the value of our asset has decreased, we continue to have the asset recorded at cost, we simply credit the depreciated amount to an amortization account set up to balance out the actual value of the asset.

In 1997 your business purchases a brand new automobile for
$35 000, you record the automobile in your books at cost (35 000). In 2002, you go back to your books and see that your automobile is still recorded at $35 000, even though it is only worth $18 000. In order to compensate you have an "Accumulated Amortization - car" account with a credit balance of $17 000. This shows that you can still have the asset recorded at cost, while only being worth market value.

The Matching Principle:

The Matching Principle states that expenses should be matched with revenues in the fiscal period that the revenue is produced. The Matching Principle has often been called the Expense Recognition Principle. (Weygandt et al, Accounting Principles Second Canadian Edition, 582)

When you use the matching principle you do not recognize the expenses you are encountering when you actually pay...

Find Another Essay On My essay gives a description of the cost principle, revenue recognition principle, matching principle and all of there differences, all the work is cited and refrenced

The History, Theory, and Application of Avogadro's Principle

691 words - 3 pages in recognition of Avogadro's initial ideas, was named after him as Avogadro's number, 6.02 x 10^23 particles in a mole.Avogadro's principle currently helps our understanding of gasses. According to the mathematical equation, V=n(Vm), there is a direct relationship between the volume of a gas and the number of moles assuming constant pressure and temperature. Also the combined gas law, P1V1/T1 = P2V2/T2 is based on Avogadro's principle. If pressure

The Greatest Happiness Principle Essay

1382 words - 6 pages , rather than the intentions involved (Mill 89). After evaluating Mill’s principle, I will then end this essay by discussing my personal opinion about the doctrine and how I believe it can be altered to better suit real-life situations. The principle of utility is based on the greatest amount of happiness an action results in to the largest quantity of people who are affected by the consequences (Mill 89). Mill believes people should

Principle of management

1033 words - 4 pages receipts (what arrived), and Costing (what the vendor invoiced)•The Accounting for all of these tasks, tracking the Revenue, Cost and Profit on a granular level.Change how a product is made, in the engineering details, and that is how it will now be made. Effective dates can be used to control when the switch over will occur from an old version to the next one, both the date that some ingredients go into effect, and date that some are

Embodiment of the Principle of Universal Jurisdiction

2384 words - 10 pages principle is applied to prosecute perpetrators of crimes against humanity. This principle also operates on the international concept of jus cogens which argues that certain obligations under international law are binding on all states and therefore they cannot be altered by a treaty. The Eichmann Trial and the Pinochet Case both have been very significant points in international legal history emphasizing the universality principle. In the

Exchange: Social and the Market Principle

1521 words - 6 pages funding from banks, and buying patterns had to change in order to succeed in business. This new form of market forced coffee distributers to develop complex partnerships in order to successfully sell their product. There is a hierarchy in which all groups depend on the others in order to get product to the consumer and make money. This social relationship is essential to coffee trading and changes as consumer needs change. Different blends of specialty

Two Forms of the Generalized Uncertainty Principle

1937 words - 8 pages and the time-energy uncertainty principle. 1. Introduction Developing a theory of quantum gravity is currently one of the main challenges in theoretical physics. Various approaches predict the existence of a minimum length scale [1, 2] that leads to the modification of the Heisenberg Uncertainty Principle: (1) to the Generalized Uncertainty Principle (GUP) [3, 4]: (2) where , is a dimensionless constant usually assumed to be of order unity

The Principle of Separate Corporate Personality

3723 words - 15 pages distinct legal personality separate to that of the owners, members, or shareholders.[2] This is known as the concept of legal personality. The 'veil of incorporation' can be described as being the separation between a company and its members. Due to the separate legal status of a company from its members this is usually very strictly maintained. However, there are certain circumstances when the courts will deny the

Daniel Bernoulli and his Principle

902 words - 4 pages my experiment? My hair dryer has different speed settings. Using the different speed settings, I will see how long it will take for the cans to bump each other. The higher the speed setting, the less time it should take because there is less pressure between the cans, and more pressure from the others side, pushing in on the cans so they can bump. Bernoulli’s principle is also present at work in many inventions today. The most common one that

Kant's Principle and Environmental Ethics

2096 words - 8 pages Kant's Principle and Environmental Ethics 1. All of the three approaches to environmental ethics use Kant's principle to various extents. The differences between them lie in their individual definitions of moral categories. It's like looking at the same slide under three different powers on a microscope. Each approach relies on Kant's principle to protect the interest of that which they deem worthy. Baxter's anthropocentric approach

Bernoulli Principle

586 words - 2 pages bottom of the wing is also deflected downwards, however, not at such a steep angle. Since every action has to have an equal and opposite reaction, the change in direction and velocity of the air is transferred to the airplane as lift. The major forces that interact on an airplane are simple. There is forward velocity provided by the engines. An angled upward vector produced by the wings. A directly vertical vector produced by the differences in

"Sanctity of Life or the Quality of Life Principle, is society forced into a moral vacuum?"

1485 words - 6 pages sacred because of the qualities that humans posses. The idea that all life is sacred as Suber points out is logistically an impossible theory to enforce; firstly all our efforts must be put towards prolonging life, all our resources and efforts must be put towards that one ultimate value, we would have to stop making cars, houses, shoes and clothes until there were enough medical machines and trained staff to allow us to delay death. More over it

Similar Essays

Archimedes And The Principle Of Buoyancy

1787 words - 7 pages . Archimedes solid is a solid that is named ‘semi regular convex polyhedron.’ (Bolnick). There are 13 shapes, which their faces represent more than one kind of polygons, and all of the angles are identical. A common example of this is called a truncated cube; which is a cube where the all of the corners of the cube are cut off, turning the corners into triangles. Another famous example of this is a soccer ball, which is a very simple solid is

Essay On Thomas Malthus And The Principle Of Population

1509 words - 6 pages 1. Introduction This essay deals with Thomas Malthus and the first two chapters of his “Essay on the Principle of Population”. At first I will provide a short biographical note on Malthus and I will also mention his main achievements. Then, a summary of Malthus' main ideas of the first two chapters of mentioned work follows. Afterward, the essay concludes with a personal note. 2. A short biography Thomas Robert Malthus was born in 1766

The Epigenetic Principle And Success Essay

1947 words - 8 pages The Epigenetic Principle and Success Human development can be described as an assembly line in the factory of life. Although we can try our best to understand the machines that propel the product down the line, all we know is what can be seen from outside the gates. There are several theories pertaining to how the factory operates, but we have no way of entering it. Some of the best theories come from Abraham Maslow and Erik Erikson who's

"The Principle Of Historical Cost Is Still Used In Accounting When There Is A Large Measure Of Agreement That It Is Inappropriate." Discuss.

1225 words - 5 pages theoretically superior valuation methodology, there are several severe problems in its current application, due to lax regulations and ineffective methods of determining current values of non-current assets. These problems within Fair Value Accounting have ensured that most companies conservatively remain using Historical Cost Accounting.What are Historical costs?Historical cost is a generally accepted accounting principle requiring all goods or