In which accounting principle are expenses matched to recognized revenues?

The principle that expenses are matched to recognized revenues is known as the Matching Principle. This accounting concept is fundamental to accrual accounting, which requires that expenses be recorded in the same accounting period as the revenues they help generate. By doing this, the Matching Principle ensures that financial statements reflect the true profitability of a company during a given period.

For instance, if a business incurs costs to produce goods that are then sold in the same period, those costs must be recognized as expenses at the same time the revenue from the sales is recognized. This alignment provides a clearer picture of financial performance, highlighting the relationship between income and the expenses incurred to earn that income.

The other principles mentioned have different focal points. The Revenue Recognition Principle pertains specifically to the timing of when revenues are recognized, not the matching of expenses. The Conservatism Principle emphasizes prudence in financial reporting by anticipating potential losses rather than gains, and the Historical Cost Principle states that assets should be recorded based on the original cost at the time of purchase. Thus, the Matching Principle stands out as the correct answer, as it directly addresses the alignment of expenses with revenues in the financial reporting process.