Question

what is the matching principle,and how can it cause accounting expenses to differ from actual cash out flow

Answer 1

Matching principle focuses on revenue recognition and expenses recognition at the same time or same accounting period no matter when the cash transaction has occurred. Asset value and depreciation over the life of the period is helped by matching principle. It is important to report the net income properly.

Matching principle causes accounting expenses to differ from actual cash out flow in flowing ways:

Expenses like cost of goods sold are recognised as soon as the revenue for those particular goods is obtained. The COGS expenses but not cause a cash outlay as the company might have high credit days so the actual outflow of cash might not be there. In this case expense is realised before cash outflow.
In next case if the good is sold later bit the cash to the supplier is paid earlier then the expense and revenue are recognised later but cash outflow occurs before it.
Depreciation and amortisation is considered expense whereas in no actual cash flow occurs.

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