Financial Review Template Transaction Description Accounting Principle Justification Based on Accounting Principle Jamie invests in a consulting firm. Cost principle Equity accounts must be recorded at cost. Purchased a computer on account Include Transaction? (Yes / No) Types of Accounts Increases or Decreases Account Yes Asset (cash) Equity (capital) Increase Increase Accrual principle Transactions have to be recorded when they happen, not when cash flows occur. Yes Asset (equipment) Liability (accounts payable) Increase Increase Jamie was paid in cash for his work. Revenue recognition principle You must record revenue only after the earning process is complete. In this case, the money was also collected. Yes Asset (cash) Revenue (service revenue) Increase Increase Jamie paid the rent. Matching principle All expenses related to revenue generating activities must be recorded when they occur. Yes Expense (rent) Asset (cash) Increase Decrease Jamie prepaid two months of rent. Going concern principle We must assume that Jamie’s firm will continue to operate in the foreseeable future. Yes Asset (prepaid rent) Asset (cash) Increase Jamie paid the ...
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