The matching principle aims to match up a number of items. Let's start with sales. The first thing I need to match this up to is the period in which this happened. The sales may have happened in say 1999, 2000 or 2001. Let's say they happened in the year 2000. So I've matched the sales to the period. The next thing that we need to try to match up is the costs associated with those sales. So for instance, let's say that we bought the inventory in 1999, but then we only sold it in 2000 which income statement should the cost of that inventory go into well, if the sale happened in the year 2000 and the sale has gone into the 2000 income statement. The cost of the inventory sold has to go into that same income statement. So even though we bought the inventory in 1999 the cost of that inventory would go into the year 2000 income statement. So to sum up you take your sales work out what period they went into and then you work out the costs associated with those sales and put them into that same period