Matching principle
Matching principle requires that the costs incurred to generate revenue are recognised as expenses in the same accounting period as that revenue, regardless of when cash moves.
Also known asmatching concept
See it move
The infographic is a timeline with three labelled points illustrating the matching principle in action. In November, 100 units are purchased at €8 each, placing €800 in inventory without any immediate expense recognition. In December, 70 of those units are sold for €1,050 of revenue, and the €560 cost of those units (70 × €8) is recognised as cost of goods sold in the same period. The remaining 30 units — representing €240 of deferred cost — stay in inventory until they are sold in a future period.
Check yourself
In October, Alvarez Bakery pays €24,000 for a supply of flour that is used entirely during November to produce goods sold in November. Under the matching principle, in which period should the €24,000 flour cost appear as an expense?
If you trained under a national GAAP
DE · HGBWhere national-GAAP intuition diverges from the international standard
HGB (German)
HGB frames matching primarily through a strict realisation principle (Realisationsprinzip) and mandatory accruals for prepaid expenses and deferred income. The income-statement-centred structure means costs are matched to the period in which related revenue is legally earned, and asymmetric prudence rules require immediate recognition of anticipated losses while deferring gains until they are realised.
IFRS
The IFRS Conceptual Framework treats matching as a by-product of asset and liability recognition rather than an independent rule. Expenses are recognised when an asset is consumed or a liability is incurred based on economic substance; the Framework explicitly cautions against applying matching logic to justify recognising items that do not meet the definitions of assets or liabilities.