Matching Principle - What Is The Matching Principle? - Debitoor

DictionaryMatching principle - What is the matching principle?

The matching principle is an accounting principle which states that expenses should be recognised in the same reporting period as the related revenues.

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In practice, the matching principle combines accrual accounting (wherein revenues and expenses are recorded as they are incurred, no matter when cash is received) with the revenue recognition principle (which states that revenues should be recognised when they are earned or realised, no matter when cash is received).

The matching principle is not used in cash accounting, wherein revenues and expenses are only recorded when cash changes hands.

Why matching is important

The matching principle a basic accounting principle that is adhered to in order to ensure consistency in a company's financial statements: i.e. the income statement, balance sheet, etc.

If expenses are recognised at the wrong time, the financial statements may be greatly distorted: in turn jeopardising the quality of the statements and providing an inaccurate representation of the financial position of the business.

For example:

• If you recognise an expense earlier than is appropriate, this results in a lower net income.
• If you recognise an expense later than is appropriate, this results in a higher net income.

Benefits of the matching principle

Certain business financial elements benefit from the use of the matching principle. Assets (specifically long-term assets) experience depreciation and the use of the matching principle ensures that matching is spread out appropriately to balance out the incoming cash flow.

The matching principle allows an asset to be distributed and matched over the course of its useful life in order to balance the cost over a given period.

Matching and Debitoor

Debitoor has aimed to make matching as simple as possible by automating the process. By subscribing to one of our larger plans you can upload a bank statement that will then match each payment to the corresponding invoice or expense.

If you connect your PayPal Business account, each payment will be recorded directly to your Debitoor account and matched automatically.

Related terms

1. Accounting principles
2. UK GAAP
3. Conservatism principle
4. Consistency principle
5. Cost principle
6. Economic entity principle
7. Full disclosure principle
8. Going concern principle
9. Materiality principle
10. Monetary unit principle
11. Reliability principle
12. Revenue recognition principle
13. Time period principle

What is Debitoor?

Designed for freelancers and small business owners, Debitoor invoicing software makes it quick and easy to issue professional invoices and manage your business finances.

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Debitoor is now SumUp!

The Debitoor application has been shut down, but if you're searching for an all-in-one invoicing software, SumUp has everything you need. SumUp is more than just invoicing software. We offer a range of integrated tools to help you run your business easily and efficiently. Open a Business Account with a free Mastercard, set up an online store, accept a variety of in-person and remote payments and much more. Start streamlining your invoices, payments and accounts today!

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