In order for organizations to provide reliable, relevant, and transparent financial information to owners, managers, investors, lenders, and the IRS they must use accrual based financial accounting systems. The revenue recognition principle necessitate that organizations recognize their revenue during the accounting time period that it is earned, not necessarily received. The time period that the income is earned is considered the time period in which the service was performed or the credit was extended. The expense recognition principle is used to match expenses with revenues during the period of time when the service is extended to generate the revenue. These two principles are important to accrual based financial reporting and are part of the generally accepted accounting principles (GAAP). It is also important because accrual based accounting is more accurate for lenders, investors, managers, and employees to know exactly where the organization stands financially at a specific point in time.