From the course: Accounting Foundations: Understanding the GAAP (Generally Accepted Accounting Principles)
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The matching principle
From the course: Accounting Foundations: Understanding the GAAP (Generally Accepted Accounting Principles)
The matching principle
- When I say match, you might think of the predecessor to the lighter, or perhaps you think of the popular dating app, or if you're older, perhaps your first thought was the Match Game. Whether it is the dating app or the old television show, the goal of both is to match this with that. We match person with person, or in the case of the television game for those of you who don't remember, we match a word with a fill-in-the-blank. The same principle is true with the U.S. GAAP matching principle. We're trying to match this with that. The this is an expense and the that is revenue. The final goal of the matching principle is to be able to look at an income statement and know how much revenue was performed during the year and to also see the expenses we incurred to produce that revenue. Let me give you a really clear example. Let's assume we rent our manufacturing facilities where we make patio umbrellas that we sell to…
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