What Are The Difference Between Matching Principle And Realization Principle And Why Are These Concepts Not Used In Cash Basis Of Accounting?


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Anonymous Profile
Anonymous answered
The Realization principle is a standard according to which the revenue is put into books only when it is earned. This happens when a product has been sold or a service has been provided. Contrary to this, matching principle states that while mentioning the net income of a period in the books, it is necessary to match the expenses as well as the revenues in the same period. The revenues and the cost incurred during the production etc are to be compared against each other. These principles are not used in cash accounting because the sale of a product or service or the earning of Revenues may not necessarily be through a Cash transaction.
d ds Profile
d ds answered
In cash base accounting, Revenue is recognized when cash is received
and expense is recognized when cash is paid. Realization principle
relates to concept of payables and receivables, but in cash basis
accounting there is no concept of payables and receivables.

In matching principle we compare our expenses and income so up to some
extent its automatically followed in cash basis accounting but in ideal
conditions it will create payables and receivables and thus cannot
replace cash basis accounting. Take a look at Accounting Methods and at This Similar Blurtit Question too.

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