Recognizing closing inventory as a deduction from cost of sales and as an asset in the statement of financial position is an application of which accounting principle?

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Recognizing closing inventory as both a deduction from cost of sales and as an asset in the statement of financial position is an application of the accruals principle. This principle dictates that expenses and income are recognized in the period they occur rather than when cash is exchanged, ensuring that the cost of sales reflects only the cost of inventory actually sold during the period, while unsold inventory is recognized as an asset.

Recognizing Closing Inventory as a Deduction from Cost of Sales