Matching concept states that expenses that are incurred in an accounting period should be matching with the revenue earned during that period. Thus, all expenses for that accounting period whether or not paid during that year and all revenue whether earned or not during the period should be considered to calculate profit or loss. Hence, depreciation of the current year is charged against the current year’s revenue. In other words, the full cost of the asset is not treated as an expense in the year of its purchase itself, rather it is spread over its useful life.
