The realization principle underlies the accounting practices of depreciating plant assets and amortizing the cost of unexpired insurance policies.

Question

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The realization principle primarily concerns recognizing revenue when it is earned, regardless of when the cash is received, and does not directly relate to the depreciation of plant assets or the amortization of insurance policies. Depreciation and amortization are governed by the matching principle, which aims to match expenses with the revenues they help generate.

The Realization Principle Underlies the Accounting Practices of Depreciating Plant