The accounting principle requires expenses to be matched with revenues in the period in which the revenue is earned. The matching principle is used in accrual accounting to make sure that income and expenses are reported in the period in which they occur, rather than when the cash is received or paid. This provides a more accurate picture of a company’s financial performance.
The matching principle is important because it ensures that expenses are reported in the same period as the revenue they helped to generate. This provides a more accurate picture of a company’s financial performance. It can also be used to manage earnings, by deferring expenses or accelerating revenues into different periods.