Accounting principles impact Case Study Example | Topics and Well Written Essays - 1500 words

Accounting principles impact - Case Study Example While this is considered to be critical to effective financial reporting, these principles are also a significant part of the financial control within organisations. The principles have different impacts upon the organisation as discussed below. This could be termed as the most significant accounting principle among all the available accounting principles. The concept of revenue recognition remains critical to financial reporting because it seeks to determine the sources of finance and expenses, in order to determine profitability of the organisation. This principle remains critical to business operations because it seeks to ensure that all the revenue generated becomes recognised through the various records used by the organisation (Kothari, Ramanna, and Skinner 252). Organisations within different industries must ensure the development of appropriate and standardised approaches through which the revenue recognition will be effected. This principle results in the development of an approach for making comparison of different accounting concepts to determine effectiveness of the organisation. Sainsbury which is a retailing outlet for household good would effectively adopt an approach for recognising revenue based on cash basis. This would be mainly because most of the transactions are undertaken instantly and the days is received upon the exchange of the product. Once the cash has been received it become recognised as a sale and revenue. UNIQOL, which is involved in a different level of retailing would have to combine the accrual and cash basis of revenue recognition in its processes. This would be mainly because of the various products which are sometimes shipped and cash is received later. Harmonisation of these transactions remains essential as the organisation seeks to ensure there is accuracy in the process of revenue