Matching Principle

FAR tests this most often through expense-recognition classification: the question hands you a cost and asks when it hits the income statement. The tell is whether the cost has a direct, traceable link to revenue (cost of goods sold, sales commissions — matched in the period the related sale is recognized) versus a cost with no traceable link. Period costs such as most administrative salaries and advertising are expensed as incurred, while asset costs benefiting many periods are systematically allocated. Work the recognition order: associate cause-and-effect first, then systematic-and-rational allocation, then immediate recognition.

The classic trap is conflating matching with accrual basis: accrual is the broad rule (recognize when earned or incurred, ignoring cash); matching is the narrower expense-timing aspect inside it (FASB’s current framework frames it as “matching costs with revenues” rather than a standalone principle, but review banks still call it one). Don’t equate it with depreciation either — depreciation is one application (systematic-and-rational allocation), not the principle, and an impairment write-down is a measurement event, not matching. Hook: match the expense to the revenue it “caused.”