Q: Is the matching principle applied to both cash and accrual accounting?
A: The matching principle is a fundamental principle in the application of accrual accounting and must be faithfully followed if a set of accrual financial statements is to be prepared according to Generally Accepted Accounting Principles (“GAAP”).
However, the matching principle does not necessarily apply to cash accounting since all revenue and expenses are recorded only when received and paid for in cash. Consequently, cash expenses may frequently precede, or follow, receipt of the cash revenue that those expenses supported.
Course overview: Critical Accounting Principles and Assumptions and More Debits and Credits