Which GAAP principle requires corresponding expenses and revenue to be recorded in the same accounting period?

• A. Matching
• B. Full disclosure
• C. Conservatism
• D. Consistency

Answer: (A)

The main concept tested is that expenses are recognized in the same period as the revenues they help generate. This is the matching principle, a key part of accrual accounting, and it ensures reported income reflects what happened in the period. For example, when you record revenue from a sale in a given month, you also record the costs tied to earning that revenue in the same month, such as the cost of goods sold or related wages. If you prepaid for an asset or service across several months, you allocate that cost to the months that benefit from it, so each period shows the expenses that relate to the revenues earned then. This principle is different from full disclosure (transparency of information), conservatism (prudence in recognizing gains and losses), and consistency (using the same methods across periods). Under GAAP, this matching is part of accrual accounting, ensuring income measures reflect the economic activity of each period.