![]() ![]() Earlier expense recognition may result in a lower net income. What Are the Benefits of the Matching Principle?įor ensuring consistency in financial statements, businesses follow the matching principle. He earns his fee the moment he finishes the job. It has nothing to do with the payment, whether it is received or not.Ī contractor who completes his job won’t wait for the payment. It is a basic accounting principle which states, the recognition and recording of revenue should be in the same period it’s earning. Other examples of the matching principle are: ![]() If a company uses the money basis of accounting, the reporting of commission should be in October (in the month they were paid) instead of September (the month in which they incur). The matching principle states that the commission expense needs reporting in September’s income statement. If the organization has $100,000 in deals in September, the organization will pay the commission of $20,000 next October. Suppose a business pays a 20% commission to sales assistants by the end of every month. Match the expenses in a current period of time during which they incur rather than a time when payment is complete. The matching principle in accounting states that matching the reporting revenues and expenses in the same period links the revenue with its profit. The basic concept of the accrual accounting method is: The matching principle is an important component in the accrual method of accounting. What Is the Matching Concept in Accounting?
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