Matching Principle
Definition
The rule that expenses are recognised in the same period as the revenue they helped generate. It is why cost of goods sold moves with sales and why prepayments are released over the periods that benefit.
Related Terms in Accounting Principles
Materiality
The threshold above which an omission or error would change a reasonable users decision about the business. It governs how much precision and disclosure a given item justifies, and is judged in context rather than by a fixed percentage.
Going Concern
The assumption that the business will continue operating for the foreseeable future, which is what permits assets to be carried at cost rather than liquidation value. Where significant doubt exists, management and auditors must disclose it.
Fiscal Year
The twelve-month period a business uses for reporting and tax, which need not match the calendar year. India uses 1 April to 31 March; the UK tax year for individuals ends 5 April; many US businesses use the calendar year, and retailers often pick a trading low point.
Cost Accounting
The practice of capturing, assigning and analysing the cost of producing goods or delivering services, so that pricing, margin and efficiency decisions rest on real figures. Internal by nature, it is not bound by external reporting standards.
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