Matching Principle Law and Legal Definition
Matching principle is a method for handling expense deductions followed in tax laws. According to this rule while determining expense deductions the depreciation in a given year is matched by the associated tax benefit. Costs should be realized in the same period as associated benefits. For example, an expenditure in the year 2000 that does not generate revenues until the year 2001 should be expensed in the year 2001 and not in the year 2000 when the cost was actually incurred.
The matching principle requires that all expenses incurred in the generating of revenue should be recognized in the same accounting period as the revenues are recognized.[In re Burlington Coat Factory Secs. Litig., 114 F.3d 1410, 1420 (3d Cir. N.J. 1997)]