Financial Accounting
9th Edition
ISBN: 9781118334324
Author: Jerry J. Weygandt
Publisher: WILEY
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Question
Chapter 3, Problem 1Q
To determine
Time Period Assumption: According to time period assumption accountants divide the economic life of a business into artificial time periods.
To Explain: (a) Effect of time period assumption on business analysis, and (b) fiscal year, calendar year, and interim periods
Expert Solution & Answer
Explanation of Solution
(a)
Time period assumption affects accountant’s business analysis in following ways:
- Recording of transactions in relevant time period.
- Allocation of costs over the relevant time period.
- Preparation of the financial statements periodically.
(b)
Explanation of the following terms:
- Fiscal Year: That time period which starts from first date of a month and ends after completion of 12 months is known as fiscal year. In simple words, the fiscal year is an accounting time period that is one year in length.
- Calendar Year: The year which starts from January 1 and ends on December 31 is termed as calendar year and many business organizations maintain their accounting period according to the calendar year.
- Interim Periods: Accounting periods are generally a month, a quarter, or a year. Monthly and quarterly time periods are called interim periods
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Chapter 3 Solutions
Financial Accounting
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