What are the key principles of accrual bookkeeping?

The revenue recognition principle and the matching principle are the two guiding concepts of accrual bookkeeping. According to the revenue recognition principle, revenue must be recognized when it is earned rather than only when it is paid out in cash. This guarantees truthful financial reporting. According to the matching principle, costs and revenues should be properly aligned by being reported in the same period as the relevant expenses. Even if there haven’t been any cash transactions, this method gives a more accurate picture of a company’s financial performance and health. As a result of having a more thorough grasp of their financial condition, firms may make more informed decisions thanks to accrual bookkeeping, which also increases transparency.

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