Resources used in one period

We saw this in the case of payment of rent in advance. Some costs, such as general administrative expenses of the bank, are not directly related to income certain accounting period. Therefore, these expenses are recognized in the income statement for the period in which they occurred. Consequently, the use of the correspondence principle allows to distinguish between income and expenses between reporting (accounting) earnings periods and agree with the cost reporting period by which received that income. Accrual and compliance is essential to determine the probable financial results. The precautionary principle. Due diligence? Uncertainty of certain events. For example, the bank is always a chance that some loans will not be returned to the borrowers. Therefore, evaluating the information in the reports, you should avoid overstating assets and understating income or expenses and liabilities of the bank. This means that the costs and liabilities should be reflected in the financial account immediately after receiving information about the probability of their occurrence, and the assets and income - only if they are actually received or earned. So, for example, doubtful and bad loans to be deducted for expenses and calculate the total amount of loans granted in the period when there were doubts about the possibility of their return. Topic: The role of accounting in the management of the bank, its types and purpose | Tags: Resources