![]() They must also record all of their associated costs for that month before reporting it on their financial statements. Let’s say a company earns $3,159 in September for selling Amazon products online. To demonstrate, it is certainly helpful to go over an example. Is Accounting Math Heavy? (Are Accountants Good at Math?) Matching Principle Example The cash basis does not fully comply with the matching principle. The matching principle is why companies under GAAP use accrual accounting. ![]() This helps ensure accurate financial reporting by creating a correlation between expenses and income, which results in a more realistic view of the company’s financial performance. The matching principle states that all expenses incurred during a business’s fiscal year should be matched with the corresponding revenue earned from the sale of products or services. ![]() Accounting Concepts: Matching Made Easy The Matching Principle Accounting Definition In order to adhere to this principle, debit and credit accounts must be balanced, meaning expenses must equal income during any given period. This principle helps to ensure a company’s financial statements are accurate and portray an accurate picture of the business’s performance. The matching principle is an essential concept in accounting that requires a company to report expenses in the same period as their corresponding revenue. What is the Matching Principle in Accounting? We’re going to look at what is the matching principle, why you need to understand it and an example. Adhering to the matching principle is key to complying with GAAP. The matching principle in accounting is one of the basic fundamental principles in Generally Accepted Accounting Principles (“GAAP”).
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