The Matching Principle




Accrual Accounting
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Hira Aziz
Entrepreneur, Pakistan

The Matching Principle

The concept of matching in accounting and finance is based on the relationship of the revenue and expense that demonstrate the cause and effect relationship between them. It requires to match the costs incurred in a specific time period with the revenue of that time period. The matching principle is one of the fundamental concepts of accrual accounting. The accrual accounting concept recognizes income at the time when it is earned and recognizes the expense when it is incurred; used, or consumed. Both of the accounting guidelines; IFRS and GAAP recommend accrual accounting to record the revenue and expense of an organization. Because it provides a clear and accurate view of the business operations and revenue earned of the company. It helps shareholders, creditors, and other stakeholders to understand and predict the company's financial performance. We might say that the concept of accrual accounting stems from the matching principle. The principle states that "all the expenses inc...

   

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