What is the Matching Principle?

The Matching Principle is part of Generally Accepted Accounting Principles (GAAP). It requires that revenues and their related expenses be recorded in the same accounting period.

As an example, Terrance Inc. sells $10,000 of merchandise in June. The merchandise was purchased from the supplier in May for $5,000. The revenue of $10,000 and the expense of $5,000 should be reported in June, the month when the revenue is reported as earned. The Matching Principle is the foundation of Accrual Based Accounting.

For more about GAAP and the Matching Principle, watch this video:

Caroline Grimm

Caroline Grimm is an accounting educator and a small business enthusiast. She holds Masters and Bachelor degrees in Business Administration. She is the author of 13 books and the creator of Accounting How To YouTube channel and blog. For more information visit: https://accountinghowto.com/about/

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