What does the matching principle require from a company?

The matching principle is a fundamental accounting concept that dictates that expenses should be recognized in the same period as the revenues they help to generate. This principle ensures that financial statements provide a true and fair view of a company’s financial performance by aligning income earned with the costs incurred to earn that income.

For instance, if a company sells a product in June but incurs costs related to that sale, such as manufacturing or marketing expenses, those costs should also be recorded in June. By correlating expenses with the revenues they generate, the matching principle enhances the accuracy of profit measurement, allowing stakeholders to better assess the company's profitability for that specific period. This correlation helps in presenting a clearer financial picture and supports better decision-making for management, investors, and other stakeholders.

The other provided options do not accurately reflect the essence of the matching principle. Minimizing expenses or maximizing dividends pertains to different financial strategies, while prioritizing cash flow over net income does not directly relate to the recognition of revenue and expenses within the same accounting period.