Question

Accounting Principle #3: Time Period Assumption:

a. Revenue is recognized when earned; Expenses are recognized when incurred
b. Revenue is recognized when received; Expenses are recognized when paid
c. Assets are valued at historical cost; Liabilities are valued at market value
d. All financial transactions must be recorded in the same accounting period

Answer 1

The Time Period Assumption in accounting requires financial transactions to be recorded in the same period they occur, ensuring consistent reporting.

Step-by-step explanation:

The Accounting Principle #3, Time Period Assumption, dictates that all financial transactions must be recorded in the same accounting period in which they occur. This principle allows companies to accurately measure their performance over specific time frames, such as quarters or fiscal years, facilitating comparison and financial analysis. The goal here is to provide a consistent and logical framework for the recording of financial transactions, regardless of when actual cash is received or paid.