What is matching principle?
The matching principle is an accounting principle that requires companies to recognize expenses in the same period as the related revenues.
The matching principle requires that expenses be reported in the same period that income is earned. This allows for the recording of income and expenses in real-time without regard for future costs and revenues.
Matching principles will assist in accurately representing financial information, making comparisons between two or more companies easier. Like amortization, is recorded for each accounting period rather than for the entire life of the asset in one accounting period. Prepaid expenses are recorded as assets for the company rather than expenses for that accounting period. The matching principle is critical for financial statement consistency.
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