26/08/2026
The Matching Principle in Accounting
1. Legal basis and objectives of the Matching Principle
The Matching Principle is one of the fundamental principles of accounting, prescribed in Vietnamese Accounting Standards No. 01 (VAS 01) ; General Standards.
The core objective of this principle, is to determine the correct profit for each accounting period, by recognizing expenses related to revenue in the same period in which they arise.
Not all cash outflows are immediately recognized as expenses.
Not all expenses depend on the timing of receiving an invoice or making payment.
Expenses should be recognized in the period in which the enterprise actually uses those resources to generate revenue.
The Matching Principle is always closely linked to the Accrual Basis Principle.
If the Accrual Basis Principle helps determine when to recognize a transaction, the Matching Principle helps determine in which period that transaction should be recognized to accurately reflect business performance.
From 01 January 2026, the corporate accounting regime is applied under Circular 99/2025/TT-BTC, replacing Circular 200/2014.
2. The Matching Principle under Circular 99/2025/TT-BTC
Circular 99/2025 does not have a separate chapter on the “Matching Principle”, but the spirit of this principle is reflected throughout the provisions on accounting principles for expenses, revenue and expense recognition, and determination of business results.
When recognizing revenue, the enterprise must simultaneously recognize related expenses to accurately reflect actual profit.
Prepaid expenses such as office rent, insurance, and tools used over multiple periods must be allocated over the period of benefit, rather than being recognized in full at the time of incurrence.
The value of fixed assets is gradually allocated through depreciation expense over their useful lives.
Expenses that have arisen but for which invoices have not yet been received or payments not yet made (electricity, water, freight, sales bonuses, etc.) must also be considered for recognition in the correct accounting period.
3. Limitations in practical application
Although the standards are clear, in practice many enterprises still operate under the mindset: “No invoice, no entry.”
This leads to many material misstatements in the financial statements.
Example 1: Year-end freight costs – December 2025: Goods delivered, revenue recognized; January 2026: Freight invoice received. Many enterprises recognize the expense in January.
Consequence: Prior-year profit is overstated; subsequent-year profit is understated accordingly.
Example 2: Utility costs – Electricity used in December but invoice issued in January. If accrued expenses are not recognized, the financial statements do not fully reflect the period’s expenses.
4. How Circular 99/2025 clarifies and reinforces the Matching Principle
In substance, Circular 99/2025 does not change the Matching Principle already prescribed in the Law on Accounting and accounting standards.
However, compared with Circular 200/2014 (no longer in effect), Circular 99 clarifies the trend toward modern accounting.
4.1. Emphasizing economic substance over documentary form
Previously, many enterprises focused on “Do we have an invoice or not?”. On the contrary, the current approach focuses on “if the economic obligation has been incurred?”.
Example: Mold repair services completed and accepted on 25 December, but invoice issued in January next year. In this case, the expense must still be recognized in December because the enterprise received economic benefits from the service in that period.
4.2. Enhancing flexibility in expense management
Circular 99 enables enterprises to be more flexible in building a system to track and manage detailed expenses according to management needs.
Example: A manufacturing enterprise producing multiple chair lines can track mold costs separately for each product, helping to more accurately determine the relationship between revenue and expenses.
4.3. Emphasizing the role of internal control
Applying the Matching Principle is not only the responsibility of the accounting department but also requires coordination among many departments.
The sales department provides information on goods delivered or services completed.
The purchasing department provides information on goods received or services accepted.
The production department updates work-in-progress costs, costs to be allocated, and asset usage status.
The HR department provides information on salaries, bonuses, and other payables to employees.
5. Key items requiring special attention
To ensure compliance with the Matching Principle, enterprises need to periodically review items at risk of being recognized in the wrong period.
5.1. Accrued expenses
Expenses that have arisen but for which invoices have not been received or payments not made at the cut-off date (electricity, water, internet, freight, subcontracting, repairs).
Omitting these expenses may cause the period’s profit to be overstated.
5.2. Prepaid expenses
Insurance, office rent, land lease, tools, software costs.
These items must be reasonably allocated over the period of benefit, rather than recognized entirely in one period.
5.3. Fixed assets
Depreciation, overhaul costs, and upgrade costs must be assessed to determine whether to recognize immediately as expense or to capitalize and allocate.
5.4. Revenue and cost of goods sold
Goods delivered/services completed but invoices not yet issued; goods sold but cost not yet recognized.
If revenue is recognized but corresponding cost is not reflected, the period’s business results will not accurately reflect reality.
6. Conclusion
The matching principle is one of the fundamental principles of accounting, enabling enterprises to reasonably determine the results of operations for each accounting period through the appropriate recognition of revenue and related expenses.
Under the new accounting regime introduced by Circular No. 99/2025/TT-BTC, the core substance of this principle remains unchanged. However, its application should place greater emphasis on the economic substance of transactions, distinguish accounting requirements from tax regulations, and strengthen the role of management and internal controls.
Accordingly, enterprises should not focus solely on the question, “Has an invoice been issued or received?” More importantly, they should determine “Which accounting period should this revenue or expense be recognized in?” and “Which revenue is this expense related to?” The existence or absence of an invoice should not, by itself, determine the timing of accounting recognition.
In practice, risks may arise when the timing and basis for recognizing revenue and expenses do not appropriately reflect the economic substance of transactions, or when the matching principle is not applied consistently throughout the organization. Enterprises should therefore establish clear accounting policies, ensure a consistent understanding and application of accounting principles across departments, strengthen internal control procedures over the recognition of revenue and expenses, accruals, and the allocation of expenses between accounting periods. Only when revenue and expenses are appropriately recognized in the relevant accounting periods can the financial statements present fairly, in all material respects, the enterprise’s financial position and results of operations.
A proper understanding and application of the matching principle not only enhances the quality and reliability of financial information and supports management and decision-making, but also helps enterprises mitigate risks arising from audits and tax inspections or examinations.
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