Final answer:
The matching principle in business accounting states that inventory costs are expensed as cost of goods sold when the inventory is sold, aligning expenses with related revenues for accurate profitability reporting.
Step-by-step explanation:
The principle being referred to in the question is the matching principle. This accounting concept suggests that companies should report an expense on the income statement in the period in which the related revenues are earned. Therefore, under the matching principle, inventory costs are expensed as cost of goods sold (COGS) at the time inventory is sold. This ensures that the revenue from the sale of inventory is matched with the cost of the inventory that was sold, providing a more accurate picture of the company's profitability during a given time period.