Which accounting principle states that expenses should be matched with revenues?

The matching principle is fundamental to accrual accounting and asserts that expenses should be recognized in the same period as the revenues they help to generate. This principle ensures that the financial statements accurately reflect a company’s financial performance by aligning expenses with the corresponding revenues. For example, if a company incurs costs to produce goods, those costs should be recorded as expenses in the same period that the goods are sold and revenues are recognized. This creates a clearer picture of the company's profitability and financial health during a specific period, rather than showing expenses in a different timeframe that could mislead stakeholders about actual performance.

The consistency principle focuses on maintaining the same accounting methods over time to ensure comparability of financial statements. The accrual principle emphasizes recognizing revenue and expenses when they are incurred, not necessarily when cash is exchanged. The revenue recognition principle deals with how and when revenue is recognized in the financial statements, which is distinct from matching expenses to those revenues. The matching principle specifically bridges the relationship between expenses and the revenues they produce, making it critical for proper financial reporting.