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By William H. Webster, CPA

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Sample text

The company needs cash from its customer to pay the ongoing costs of construction. GAAP has industry specific guidelines on activities like progress payments to accommodate special needs of unique business activities. The matching principle measures the performance of the gozinta and gozouta for each time period. The costs of doing business, the expenses, in the period are matched to the revenues generated. Revenues earned less expenses incurred equals income. Income is the measure of performance for the period.

The time frame in which the report is prepared must take these differences into account in stating the results. What’s Current? The term “current” is used a lot in accounting circles. It can be confusing, because the word has various meanings. Here are some examples: • Current value: value at the present time. , cash, accounts receivable, supplies, and merchandise inventory. , accounts payable, salaries payable, sales tax payable, and the current portion of notes payable. 32 Accounting for Managers The Four Principles • • • • cost revenue recognition matching full disclosure The cost principle requires that assets appear on the books at the acquiring cash value.

Does it describe on a timely basis the transactions in sufficient detail to permit proper classification of transactions for financial reporting? This objective concerns the financial statement assertion of presentation and disclosure. • Can it measure the value of transactions in a manner that permits recording their proper monetary value in the financial statements? This objective concerns the financial statement assertion of valuation or allocation. • Are transactions recorded in the proper accounting period?

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