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top   »  economics   »  finance   »  financial management   »  matching principle

What is the Matching Principle?

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The matching principle is a fundamental practice of accounting that states that expenses are reported for the same period as related revenue.
In many cases, expenses such as cost of goods sold and sales commissions can be related to revenue. Such costs aren't reported when they are paid out. Instead, they are reported together with matching revenue.
Expenses that can't be related to revenue are reported when they are used. For example, if you buy supplies in November for an office party in December, you would report the expense in December when the supplies are used.
Overview: Matching Principle
Type
Accounting
Definition
Expenses are reported in the same period as related revenues.
Value
It would be difficult to determine the profit/loss of a firm if revenues weren't matched to related costs.
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