What principle is considered the basis for accrual accounting?

The matching principle is fundamental to accrual accounting because it dictates that expenses should be recognized in the same period as the revenues they help generate. This approach ensures that a company's financial statements provide a clear picture of its financial performance over a specific time frame. By aligning expenses with the revenues they contribute to, the matching principle allows for a more accurate reflection of profitability, enabling stakeholders to assess the true financial position of the organization.

In contrast, the cost principle relates to valuing assets at their original cost, the revenue recognition principle focuses on when revenue is recognized in the accounting records, and the economic entity principle emphasizes that a business's finances should be kept separate from its owners or other entities. While these principles play important roles in the overall framework of accounting, it is the matching principle that serves as the cornerstone of accrual accounting practices.