What does the matching principle in accounting dictate?

The matching principle in accounting stipulates that expenses should be recognized in the same period as the revenues they help to generate. This principle ensures that financial statements accurately reflect the economic activity of the period, allowing for a clearer view of a business's performance. By matching expenses with corresponding revenues, businesses can provide a more accurate depiction of profitability during a given period. This principle is foundational in accrual accounting, where transactions are recorded when they are incurred rather than when cash changes hands, thus aligning income and expenses more appropriately.

The other options do not align with the definition of the matching principle; for example, recording expenses when paid does not consider the timing of related income. Similarly, matching revenues with prior year expenses doesn't reflect current period performance, and stipulating that recognized revenues must exceed expenses does not directly relate to the matching principle's intent of aligning expenses with the revenues they generate.