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Various Principles Govern The Accounting Practice In The United States Of America. The Financial Accounting Standards Board (fasb) Sets The Generally Accepted Accounting Principles (gaap). The Principles Include Revenue Recognition, Matching, Consistency, Conservatism And Materiality. Revenue Recognition Identifies The Specific Conditions For Recognizing And Identifying The Revenues Generated By A Company. Identification Of Revenue Is Through Evaluation Of Customer Contract And Its Obligations, Transaction Costs And Calculation Of Revenue After Assessing Performance. The Matching Principle Stipulates That Companies Should Report Their Accounting Activities In The Same Specific Period, For Instance, Recording Of Expenses Upon Payment. It Creates Consistency In Various Accounting Reports Such As Balance Sheets. The Consistency Principle Stipulates That A Company Should Use One Method Or Principle In Calculating And Tabulating Its Activities In The Present And Future Periods. Conservatism Principles Ensures Recognition Of Expenses And Liabilities As Soon As Possible When There Is Uncertainty About The Outcome. It Stipulates To Only Recognize Revenues And Assets When There Is An Assurance Of Being Received. Business Entities Adhere To The Above Principles In The Formulation Of Financial Statements Regulated By The Fasb.

Revenue Recognition PrincipleThis is the Generally Accepted Accounting Principle (GAAP) that recognizes the explicit conditions in which revenue is acknowledged and the w...
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