Which accounting principle requires that expenses be matched with revenues?

The principle that requires expenses to be matched with revenues is known as the matching principle. This accounting concept ensures that when revenues are recognized in the financial statements, the related expenses incurred to generate those revenues are also recorded in the same accounting period.

This approach enhances the accuracy and integrity of financial reporting by providing a clearer picture of a company's profitability during a specific period. By aligning expenses with the corresponding revenues, businesses can more effectively gauge their operational performance.

While the revenue recognition principle focuses on the criteria for recognizing revenue, it does not directly address how expenses are treated in relation to that revenue. The consistency principle deals with the idea of using the same accounting methods over time to ensure comparability, rather than focusing on matching revenues and expenses. Lastly, the accrual basis of accounting encompasses the recognition of revenues and expenses when they occur, regardless of cash transactions, but it is the matching principle that specifically emphasizes the alignment of these two elements in financial statements.