This report aims at discussing the accounting principles related to cost, revenue recognition and matching principles which are presented under GAAP (Epstein, Nach, & Bragg, 2009). Apart from this, the report also includes how Dell Incorporation, a public company in the US, applies these accounting principles in the preparation and presentation of its financial statements and how recent changes in the accounting principles have affected company’s financial reporting. Moreover, a brief review of assertions related to internal controls of Dell Incorporation has also been provided in the report.
Under U.S. GAAP, accounting principles related to cost, or more specifically “historical cost”, include requirements for business entities for accounting for and reporting their assets on the basis of costs for acquiring them. In other words, cost recognition and reporting on fair market value is not allowed for majority of assets and liabilities under US GAAP. In this way, the information provided by such accounting treatment is more reliable due to its objective nature. This condition for reporting assets in the balance sheet on historical costs is also applicable even if there are major changes in the value of an asset with the passage of time. However, making use of historical cost is not appropriate in every case and therefore use of fair value is permitted in certain cases. As for instance, corporate entities are allowed to use fair values of marketable securities while reporting their values in their respective balance sheets (Epstein, Nach, & Bragg, 2009).
Revenue recognition is an accounting principle, which determines the requirements which are to be fulfilled before any amount in lieu of revenue can be recognized by a business concern (Epstein, Nach, & Bragg, 2009). As far as revenue recognition under U.S. GAAP is concerned, corporate entities are required to recognize revenues