Respond to Yvonne————–Exchange-price (or cost) principle – the business must record the price that was paid or the exact amount of credit it was issued to make a purchase which is also known as a measurement principle. It’s also known for historical cost as the appropriate basis of initial accounting recognition of all acquisitions, liabilities, and owners’ equity.
Revenue recognition principle – revenues are recognized at the time goods, and services are provided. It doesn’t matter when payments are received. Revenue recognition principle is in line with accrual-based accounting method, it determines when it should be recognized (recorded). Two criteria’s are met; the earning process is substantially complete, and the revenues are realized, or realizable.
Matching principle is when expenses are recognized when goods or services are provided and are offset (subtracted) against revenues generated from those expenses, regardless of when payment is made.
Gain and loss recognition principle – are recorded at the time cash is received, and loss is recorded when they become apparent.
Full disclosure principle – businesses are required to report in detail items on a financial report that would impact the users of the financial report which is normally added to the end of the financial report in the form of footnotes. In essence, accounting reports must disclose all facts that may influence the judgment of an informed reader.
Financial reporting & analysis; using financial accounting information, 10th ed. (2007). Reference and Research Book News, 22(4) Retrieved from https://search-proquest-com.ezproxy1.apus.edu/docview/199678485?accountid=8289————————————————–Respond to Andrew————-The five Generally Accepted Accounting Principles that accountants must consider when presenting financial accounting information are the exchange-price principle, revenue recognition principle, matching principle, gain and loss recognition principle and the full disclosure principle. The generally Accepted Accounting Principles are a set of standards that are based on best practices developed by organizations such as the American Institute of Certified Public Accountants, the Financial Accounting Standards Board and the Securities and Exchange Commission. These standards allow other companies, institutions or investors to view accounting data in a similar format and therefore have an easy time understanding other organizations financial records.
According to the exchange-price principle, a company must record transfers of assets at the price paid at the sale. The revenue recognition principle dictates that revenue is not recorded until it is actually earned. In other words, the seller must fully deliver a product or service and the buyer must be obligated to pay for the service and product. When a company incurs an expense in order to produce revenue, the accountant recognizes and records the expense bases on the matching principle. The gain and loss recognition principle makes a clear distinction between when gains and losses are recorded. Gains are only authorized to be recorded once the gain is substantiated through a sale or exchange. For example, when a property owned by a company skyrockets in value during a rise in the real estate market, the company cannot not record that as a gain. If they choose to take advantage of the market and sell the property for a large profit, then that sale would be recorded as a gain. In order for there to be transparent financial records, companies must record any information that is important enough to influence a decision of someone who is reading a company’s financial statement. This requirement is due to the full disclosure principle