Profit is only informative if the revenue and the costs behind it sit in the same period. The matching principle enforces this: recognise the expense when its related revenue is recognised, not when the cash happened to leave.
It is the reason accrual accounting spreads a prepaid year of insurance across twelve months, and the reason the cost of subcontractors on a March project belongs in March even if you paid them in April.
Why It Matters
Without matching, monthly profit whipsaws with payment timing and tells you nothing about whether the work itself made money. With it, a project’s revenue and its costs meet on the same page — which is what makes questions like "was that client profitable?" answerable at all. It is also half the reason accrual accounting exists; revenue recognition is the other half.
Example
An agency invoices a $10,000 April project that cost $3,000 in freelancer fees, paid in May. Under matching, both the $10,000 and the $3,000 belong to April: the project shows its true $7,000 margin in one period, instead of a fake $10,000 April and a mysterious $3,000 May loss.
Frequently Asked Questions
Does the matching principle apply to cash-basis books?
No — cash accounting records by payment date, so revenue and related costs routinely land in different periods. Matching is a defining feature of accrual accounting.