What are the 4 principles of GAAP?
The four principles of GAAP are:- Cost, Matching, Disclosure, and Revenue.
The “cost” principle mention the notion that all the values which are listed and reported are the costs to acquire the asset and not to acquire the fair market value,
The “matching” principle states that the expenditures in the financial statement need to be matched with the revenue. Accountants have to include the value of the spending in the financial statements when the work product is sold, & not necessarily when the work or an invoice is issued.
The “disclosure” principle states that information pertinent to form a reasonable judgment on the company's finances have to be included, so long as the amount to get that information is understandable.
The “revenue” principle affirms that all the revenue need to be reported when is it realized and earned and not necessarily when the real cash is received. This is also called accrual accounting.