Which accounting treatment best reflects the accounting period concept?
Correct answer: D. Preparing financial statements for a defined twelve-month period
- A. Combining the records of several unrelated businesses
- B. Recording every transaction only when the business closes
- C. Reporting income only when all customers have paid
- D. Preparing financial statements for a defined twelve-month period
Explanation
The accounting period concept divides the continuing life of a business into artificial periods for reporting purposes. A business can therefore measure performance for a year without waiting until it permanently ceases operations.
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About Accounting Principles
Accounting principles explain the rules used to record, classify and report business transactions. Coverage includes the accounting equation, double-entry system, accrual and cash bases, matching and prudence concepts, consistency, going concern, business entity, and the difference between capital and revenue items.
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