Final answer:
The accounting cycle is the process of recording, summarizing, and analyzing financial transactions periodically, leading to the calculation of accounting profit. The correct option is B.
Step-by-step explanation:
The correct statement that explains the accounting cycle is: B) The periodic process of recording, summarizing, and analyzing financial transactions.
The accounting cycle includes numerous steps beginning with the initial recording of business transactions as journal entries and progressing to posting those transactions to ledgers, adjusting the entries at the end of the period, preparing financial statements, and closing temporary accounts to begin the next accounting period.
This cycle is integral to the operation of any business, as it ensures that the company's financial statements are accurate and up-to-date for decision-making and reporting purposes.
It is important to understand that accounting profit is one of the key outcomes of the accounting cycle. Accounting profit is calculated by taking total revenues and subtracting explicit costs, such as depreciation. This differs from economic profit, which takes into account both explicit and implicit costs.
Decisions on whether to continue production in the short run can be influenced by identifying profits and losses with the average cost curve and determining the price at which a firm should continue producing. The correct option is B.