Matching principle

Matching principle
See also

Matching principle requires that in order to ensure commensurability of revenues and related costs to assets or liabilities of a given reporting period, they should include costs or revenues related to future periods and costs that have not yet been incurred in this reporting period. Therefore, the entity should qualify incurred costs (and revenues) to those that affect the financial result of the current period and to future reporting periods. The effect of applying the matching principle is, inter alia, making active accruals of costs in relation to those expenses incurred that relate to future reporting periods. The subject of accruals may be operating expenses and financial costs. Operating expenses settled over time include, among others[1]:

  • costs of motor and property insurance,
  • costs of major overhauls of fixed assets,
  • rent costs paid in advance for future years,
  • costs of pre-paid magazine subscriptions,
  • the initial fee incurred when concluding the operating lease agreement,
  • annual fees for perpetual usufruct of land,
  • costs of ongoing development works, if they are successful and will be included in intangible assets.

On the other hand, financial costs settled in time include, among others:

  • the difference between a higher buy-back price and a lower selling price issued by bond units,
  • costs of interest paid in advance on loans and advances received for current purposes.

Making passive accruals of costs[edit]

The matching principle obliges also to make passive accruals of costs. They concern costs not yet incurred (liabilities arising in future reporting periods), which are related to the current reporting period. Passive accruals of costs are made in the amount of probable liabilities falling into the current reporting period, resulting in particular from:

  • from the services provided to the entity by the counterparties of the entity, and the liability amount can be estimated reliably
  • from the obligation to perform, related to current operations, future employee benefits, including retirement benefits, as well as future benefits to unknown persons, the amount of which can be estimated reliably, although the date of the liability is not yet known, including warranty repairs and warranty for sold products of long-term use.

Other accounting principles[edit]

In addition to the matching principle, there are many other accounting principles that should be applied. Here are a few of them[2]:

  1. Conservatism principle - is one of the overriding principles of accounting, which requires valuation of the assets of the entity and sources of their origin, so as not to distort the financial result.
  2. Consistency principle - consists in applying the adopted method of conduct in subsequent years, in order to ensure the comparability of subsequent reporting periods.
  3. Cost principle - business should record their assets, liabilities and equity at the original cost at which they were bought or sold.
  4. Going concern principle - according to this principle, it is assumed that the entity will run a business in the near future, does not intend to cease it or is not forced to liquidate or significantly reduce its activity.



  1. Delves, L. M., & Hall, C. A. (1979).An implicit matching principle for global element calculations. IMA Journal of Applied Mathematics, 23(2), 223-234.
  2. Daske, H. (2006).Economic Benefits of Adopting IFRS or US‐GAAP–Have the Expected Cost of Equity Capital Really Decreased?. Journal of Business Finance & Accounting, 33(3‐4), 329-373.

Author: Magdalena Lewicka