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company xyz recognizes $2k in sales in the month of August, Auditors determine that $200 in...

company xyz recognizes $2k in sales in the month of August, Auditors determine that $200 in telephone expenses was incurred to generate that revenue and require xyz to record the amount in the month of August. This is an example of what accounting principle?
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Answer #1

Matching principle.

The matching principle of accounting says that an income shall be matched with the expenses incurred to earn it.

For example, in order to earn revenue by selling a loaf of bread, the expenses incurred in making the bread shall be matched with that revenue.

In the given example $2k sales is the revenue and the $200 expenses incurred in earning them shall be deducted from that revenue in determining the net income, this is an example of matching principle of accounting.

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