Accounting requirement to match expenses with revenue in the period that revenues are earned.
Presenting related income and expenses together in the appropriate period. A benefit of accrual basis accounting.
A method of analysing the sales and expenses which make up those sales to a particular period (eg. if a builder sells a house then the builder will tie in all the raw materials and expenses incurred in building and selling the house to one period - usually in order to see how much profit was made).
Matching revenue earned during an accounting period with the expenses incurred in generating the revenue.
The concept that all costs and expenses incurred in generating revenues must be recognized in the same reporting period as the related revenues.
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. Ideally, the matching is based on a cause and effect relationship: sales causes the cost of goods sold expense and the sales commissions expense. If no cause and effect relationship exists, accountants will show an expense in the accounting period when a cost is used up or has expired. Lastly, if a cost cannot be linked to revenues or to an accounting period, the expense will be recorded immediately. An example of this is Advertising Expense and Research and Development Expense. To Top
In accounting, the matching principle indicates that when it is reasonable to do so, expenses should be matched with revenues. When expenses are matched with revenues, they are not recognized until the associated revenue is also recognized. For instance, wages paid to manufacturing workers are not recognized as expenses until the actual products are sold.