Unit 2 - 3 gaaps

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Last updated 6:36 PM on 3/17/25
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5 Terms

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Time Period Concept:

  • Fiscal periods for a business’ income statements need to be of equal lengths of time

2
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Revenue Recognition Principle
A GAAP principle stating that revenue is recognized when a transaction occurs, not necessarily when cash is received.
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Matching Principle
A principle stating that expenses must be recorded in the same fiscal period as the revenues they helped to generate.
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Example of Matching Principle
An advertisement costing $1,000 used for a sale on December 30th, 2017, illustrates the matching principle as the expense is recorded in 2017 even though paid in January 2018.
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Service Provided
The point at which revenue is recognized under the Revenue Recognition Principle.