Question

1. Which principle in accounting allows the recognition of accounts receivable and accounts payable transactions into accounting books? and  State the accounting principle applied to determine the performance of an entity at the end of the financial period.

Answer 1

The principle in accounting allows the recognition of accounts receivable and accounts payable transactions into accounting books is Accruel Concept.

Accrual concept is the most fundamental principle of accounting which requires recording revenues when they are earned and not when they are received in cash, and recording expenses when they are incurred and not when they are paid.

Accounting principles are uniform practices which entities follow to record, prepare and present financial statements. An entity must prepare its financial statements as per acceptable accounting principles in order to present true and fair view of state of affairs of entity.

Accounting principles applied to determine the performance of an entity are:

Accruel Principle

Conservative Principle

Consistancy Principle

Going concern principle

Matching Principle

Revenue recognition principle.