Other key provisions of principle

The correspondence principle allows the calculation of the financial results of the reporting period by comparing the income of the reporting period with expenses that are incurred to produce that income. The pivotal position of the correspondence principle is that the revenues and expenditures must be properly evaluated in each account (reporting) period. Revenues for the reporting period is determined on an accrual basis, and then costs should be linked to earned income. The difficulties of applying this provision lies in the fact that in practice business operation begins in one reporting period, and ends in another. In the example of a loan, we saw it. The correspondence principle determines the order of cost estimates based on the purpose for which the expenses occurred. If the costs associated with a particular income, they are recognized in the period in which the income was earned. By studying the report on financial results, we have seen that the interest expense associated with banking operations to attract deposits, are displayed together with the interest income earned from lending operations, and is calculated by comparing interim financial results in the form of net interest income. Topic: The role of accounting in the management of the bank, its types and destination