The matching concept (also known as the matching principle) is a core accounting rule that ensures expenses are recorded in the same period as the revenues they help generate. By linking costs to the income they generate, this principle provides a true representation of a company’s profitability.
The matching principle states that all expenses related to earned revenue should be recorded in the same accounting period as that revenue. This ensures that financial statements reflect the true relationship between income and the costs incurred to generate it.
The matching principle is a foundation of accrual accounting . Under this system, revenues and expenses are recognized when they are earned or incurred, not necessarily when cash is received or paid. For example, if goods are delivered in March but payment is collected in April, both the revenue and related costs are recorded in March.
An Excel model for applying the matching principle often includes:
The matching principle ensures that revenues and expenses are reported in the same period, creating reliable financial statements. It provides a fair view of profitability, supports compliance with GAAP, and prevents misleading profit figures. Though applying it can be complex—especially with uncertain or long-term costs—it remains a cornerstone of accrual accounting and accurate financial reporting.
It’s the rule that expenses should be recorded in the same period as the revenues they help generate.
It ensures revenues and expenses are accurately matched, giving a true measure of profitability for each period.
Revenue is recognized when earned, and related expenses are recorded at the same time, regardless of cash flow.
Complex revenue recognition, timing differences, and linking marketing costs to specific revenues.
Yes—if employees work in December but are paid in January, their December salaries are recorded as December expenses.
It follows GAAP requirements to present accurate, consistent financial statements.
It ensures that income statements reflect true profitability by matching related revenues and expenses in the same period.