Question

The two accounting principles that are critical to the adjusting process used in accrual accounting are:_______

Answer 1

The matching principle and the revenue recognition principle are the two accounting principles that are critical to the adjusting process.

The revenue that should be recognized in the accounting period in which it is earned is stated by the revenue recognition principle. Efforts (expenses) can be matched with accomplishments (revenues) as stated by the matching principle.

Revenue recognition principle: It is a generally accepted accounting principle (GAAP) that stipulates how and when the recognition of revenue should be done. This principle is using accrual accounting requires in the revenues are recognized when realized and earned but not when cash is received.

The matching principle: It is also an accounting principle that records revenues and expenses. It needs the business records expenses alongside when revenues are earned.  They both fall within the same period of time for the clearest tracking ideally. Businesses must incur expenses to earn revenues as which is recognized by the particular principle.

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