Matching principle

Matching principle is a cornerstone of accrual accounting together with the revenue recognition principle. They both determine the accounting period, in which revenues and expenses are recognized.

matching principle
The principle that requires a company to match expenses with related revenues in order to report a company's profitability during a specified time interval.

Matching Principle
A fundamental concept of basic accounting. In any one given accounting period, you should try to match the revenue you are reporting with the expenses it took to generate that revenue in the same time period, ...

Matching Principle
An accounting principle that ties expense recognition to revenue recognition,
dictating that efforts, as represented by expenses, are to be matched with accomplishments, ...

Matching principle
Definition: The accounting rule that requires the recording of sales and the expenses that allowed those sales to happen in the same accounting period.

matching principle Principle stating that expenses are compared to revenues for the same period.
materiality An accounting guideline stating that relatively important data should be included in financial reports.

Matching principle - A method of analysing the sales and expenses which make up those sales to a particular period (e.g..

Because of the matching principle of accounting, revenues and expenses should be recorded in the period in which they are incurred. When a sale is made on account, revenue is recorded along with account receivable.

This is what is meant by associating cause and effect, and is also referred to as the matching principle.

The general idea is that economic events are recognized by matching revenues to expenses (the matching principle) at the time in which the transaction occurs rather than when payment is made (or received).

But the cash basis method fails the matching principle: expenses must be recorded in the same period as the revenues it helped to earn.

See also: Expense, Accounting period, Generally accepted accounting principles, Cash basis, Accounting records