The principle of horizontality is a fundamental concept in accounting that states that revenues and expenses should be recognized in the same accounting period. This means that when a revenue is earned, the corresponding expense that was incurred to generate that revenue should also be recorded in the same accounting period.

The principle of horizontality is important because it ensures that the financial statements of a company provide a true and fair view of its financial performance. If revenues were recognized in a different period from the expenses that were incurred to generate those revenues, the financial statements would not accurately reflect the company's financial performance.

For example, if a company recognizes revenue from a sale in one accounting period, but does not record the cost of goods sold until the following accounting period, the company's financial statements would show an inflated net income for the first accounting period and a decreased net income for the second accounting period. This would give investors and other users of the financial statements an incorrect impression of the company's financial performance.

The principle of horizontality is one of the basic principles of accounting, and it is followed by all companies that prepare financial statements in accordance with Generally Accepted Accounting Principles (GAAP).