The Matching Principle

Definition

The accounting rule that each cost should be recognized in the periods that benefit from it. The single rationale behind depreciation, amortization, accruals, and deferred revenue.

Worked Example

A $36,000 software license serving the business for 3 years:

Wrong (cash view):  Month 1 expense $36,000, months 2-36 expense $0
Right (matching):   Every month expense $1,000 for 36 months

Interpretation & Pitfalls

When you see depreciation, accruals, prepaid assets, or deferred revenue, you are seeing the matching principle at work — moving cost or revenue to the period it belongs to.

In TupicFinance

Depreciation/amortization schedules and accrual workflows exist precisely to enforce matching automatically.