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 Basic Principle of Flight Essay

1005 words - 5 pages Flight has been a dream of mankind, after the completion of the first powered airplane flight initiative from the Wright brothers, aviation technology is changing rapidly. From ancient light aircraft to a hundred tons airliner or even a fighter jet that flexible than eagle, flying technology has become one of the amazing achievement in science and technology. Aerodynamics is a fundamental principle of flight and civil aircraft unit, in order to

The Basic Principle of Flight Essay

990 words - 4 pages Flight has been a dream of mankind, after the completion of the first powered airplane flight initiative from the Wright brothers, aviation technology is changing rapidly. From ancient light aircraft to a hundred tons airliner or even a fighter jet that flexible than eagle, flying technology has become one of the amazing achievement in science and technology. Aerodynamics is a fundamental principle of flight and civil aircraft unit, in order to

The Acknowledgement of Basic Principle

1069 words - 5 pages conviction in mindful action. To give a reason, I chose ninjutsu over other martial arts would thereby further display my ignorance because I believe ninjutsu chose me. Martial arts are the canvas for warriors artistic expression and the protector of his/her spirit. The end state for the martial artist is to master their artistic expression by attaining the imminence of divinity. So mastery becomes the purpose for repetition. All the while

"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

Not All is Uncertain as a Consequence of Heisenberg’s Uncertainty Principle

746 words - 3 pages The Heisenberg Uncertainty Principle is a fundamental concept in quantum mechanics that paved the road to understanding many uncertainties in the ability of an observer to measure more than one variable simultaneously. The Uncertainty Principle refers to the fact that the accuracy in one measurement, within some range of certainty, comes at the cost of accuracy in another measurement (Rohrlich 147-51). Not all experimental values are uncertain

What is the Verification Principle?

1741 words - 7 pages carry it out yet. However, statements such as ‘the love of all money is the root of all evil’ is not meaningful since it is impossible to verify. (Ayer, 1952) In his book, ‘Language, Truth and Logic’ (1936), A.J. Ayer reinforced the verification principle when he noted that since the existence of God cannot be rationally demonstrated, it is not even probable because the term ‘God’ is a metaphysical term referring to a transcendent being that cannot

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 European Union and The Precautionary Principle

2077 words - 9 pages that, if the technology is safe why do we need to take any precautions? Even as evidence for safer GMs grow, the precautionary principle trumps most changes from being introduced because if there is any calculated risk, no matter how small and even if there exists evidence that gives great indication to the contrary, it is still considered too great a risk. The precautionary principle has also been linked to a curb in the amount of investments

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

Einstein's Principle of Relativity

979 words - 4 pages that Einstein's Principle of Relativity was based on what Galileo had previously dicovered in the seventeenth century. However, it would be fair to say that Einstein was a very successful person when dealing with the ways of the universe for he made many groundbreaking discoveries in his lifetime. The Principle of Relativity is, in few words, a wonderful discovery that help advance and almost perfect the world of physics. Works Cited • • •

Business and Society: Principle of Rational Egoism

618 words - 3 pages the government seeks to allow more competition in an industry that allows near-monopolies, more harmful side effects occur than those that benefit society. Although the utility industry in the 1990s successfully flourished as a result of a deregulated system, there are more examples of companies that exercised unethical business practices with this renewed sense of freedom (e.g., Enron scandal) that had greater impact on our society and the way we

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

Defense Of The Closure Principle Essay

3076 words - 13 pages Despite the efforts of skeptics, there are no counter-examples that are sufficient in proving that the Closure Principle is invalid. This is Jonathan Vogel’s main argument in his paper, Are There Counterexamples to the Closure Principle? Vogel presents an interesting argument against counterexamples like Fred Dretske’s “Zebra Case”. He introduces a set of conditions required for such counterexamples to work, and in doing so, demonstrates why