Matching Principle

Matching.concept is used in both Accrual vs. Cash basis of accounting.

eg.

Accruals- If a company wants to pay supplier next year, then

2021

Purchases a/c

To Payables a/c

Cash basis- if a company wants to pay the supplier next year, then

2022

Purchases a/c 200₹

To Bank a/c 200₹

Thus, this principle works as a core principle to record transactions for any given year I.e., debit and credit is posted in the same period. Revenue and expenses are matched to the same year, so revenue arising in 2021, but payments made in 2022, both revenue and expenses will be recorded in 2022 as complete receipts is fulfilled in a year.

So, revenue & purchases related to 200₹ purchases will be recorded in 2022.

Hey Yasaswi! Nice attempt explaining the matching principle, but there’s a little confusion here between accrual basis and cash basis accounting, and how the matching principle actually works.

Here’s a clearer explanation:

Matching Principle (in Accrual Accounting)

Expenses should be recognized in the same accounting period as the revenues they help generate.
So, if you buy something in 2021 but pay in 2022, under accrual accounting, the expense is recorded in 2021 (when you receive/use the goods or services), not when you pay.
This means you record the purchase and the liability in 2021, and when you pay in 2022, you reduce the liability (payables).

Example (Accrual Basis):

Date	Entry
2021	Purchases A/c Dr ₹200
	To Payables A/c ₹200
2022	Payables A/c Dr ₹200
	To Bank A/c ₹200

Cash Basis Accounting

Here, expenses and revenues are recorded only when cash is actually received or paid.
So, if you buy something in 2021 but pay in 2022, the expense is recorded only in 2022, when cash is paid.

Example (Cash Basis):

Date	Entry
2022	Purchases A/c Dr ₹200
	To Bank A/c ₹200

Your statement:

“revenue & expenses will be recorded in 2022 as complete receipts is fulfilled in a year.”
This is true only under cash basis accounting but not under accrual accounting or the matching principle.

In short:

Matching principle applies to accrual accounting and says expenses are matched with revenues in the period they occur, not when cash is paid.
Cash basis ignores this and records only on cash movement.