What principle implies transactions are recorded when they occur rather than when cash changes hands?

The principle that implies transactions are recorded when they occur, rather than when cash is exchanged, is the Accrual Basis of Accounting. This method recognizes revenues and expenses in the period in which they are incurred, regardless of when cash is actually received or paid. This approach provides a more accurate picture of a company’s financial position and performance because it records the economic events that have occurred during a given period.

This recognition allows for a better matching of revenues with the related expenses, thereby reflecting the true operational outcomes of a business. For instance, if a company delivers a service in December but does not receive payment until January, under the accrual basis, the revenue would still be recognized in December. This principle is fundamental in financial reporting, as it leads to more relevant information for decision-making.

In contrast, while the Matching Principle is related to timing by matching revenues with related expenses, it does not directly address the recording of transactions at the time they occur. The Revenue Recognition Principle focuses specifically on how and when revenue is recognized, but it is a component of the broader Accrual Basis. The Cash Basis of Accounting records transactions only when cash is exchanged, which does not align with the question's description of when transactions are recorded.