Question

What is the periodicity assumption?

a. Companies should recognize revenue in the accounting period in which it is earned.
b. Companies should match expenses with revenues.
c. The economic life of a business can be divided into artificial time periods.
d. The fiscal year should correspond with the calendar

Answer 1

The periodicity assumption in accounting states that the economic life of a business can be divided into artificial time periods. This assumption helps companies generate accurate financial reports and make informed decisions.

Step-by-step explanation:

The periodicity assumption in accounting refers to the concept that the economic life of a business can be divided into artificial time periods. This assumption is crucial for generating reliable financial reports and making effective decisions. It allows companies to recognize revenue in the accounting period in which it is earned and match expenses with revenues.