The revenue recognition principle dictates that revenue should be recognized in the accounting records in which it is earned.
Generally accepted accounting principles refers to collection of commonly known and followed accounting rules and standards for financial reporting.
The four general accounting principles are:
1. Expense Recognition: This principle shows that costs are recognized when the relevant revenue is realized.
2. Measurement: This principle states that a company only needs to record a transaction if it can be expressed in money.
3. Revenue Recognition: This policy states that revenue is recognized when it is recognized and not necessarily when it is paid.
4. Full Disclosure: This principle requires public companies (those who buy and sell shares in the open market) to disclose all relevant financial information to shareholders .
Hence, the revenue recognition principle dictates that revenue should be recognized in the accounting records in which it is earned.
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