Closely related to the accrual principle is the matching principle.

The matching principle applies to the income statement and states that expenses must be recognized in the same period as the revenue to which they relate.

A great example of this is cost of goods sold.

For a retailer that buys inventory to sell all the inventory they buy in one period is not necessarily sold in that same period.

Any inventory that is purchased but not yet sold sits on the balance sheet as a current asset.

It's only when that inventory is sold that it makes its way out of the balance sheet.

The asset disappears and into the income statement as an expense under cost of goods sold.

In this way, the cost of the inventory has been placed in the income statement in the same period as the related sales were made.

I.e., the cost has been matched to the sale.