Matching Principle

The Matching Principle is an accounting concept that states expenses should be recorded in the same time period as the revenues they helped generate. This ensures that a company's financial statements accurately reflect its performance. For instance, if a business sells a product in March but pays for advertising in February, the advertising expense should also appear in March’s financial records. This principle provides a clearer picture of profitability, helping stakeholders understand how costs relate to generated income, leading to more informed decision-making.