Question

Unearned revenues and deposits primarily match billed in advance. Such revenues and deposits are recognized in the following y represent monthly charges to customers for radio paging rental and provided or are applied against the customer's final bill or last month's rent posits are recognized in the following month when service What basic principle of accounting guides American Paging's handling of its uncam deposits? erican Paging's handling of its unearned revenues and

Answer 1

It is the Accrual concept and matching principle of Accounting which guides American Paging handling of its unearned revenues and deposits.

According to accrual concept, revenues and expenses should be recognized on accrual basis and not on cash basis. It means that the revenue should be recognized when due regardless of whether it is received or not and expenses should be recognized when incurred, regardless of whether they are paid or not.

When matching principle is applied, revenue should be recognized and matched with the related expenses. In other words, revenue should be recognized in the period when it is earned and should be matched with the expenses incurred in that period to earn the revenue.