Question
The assumption that the life of the business can be divided into time intervals for reporting purposes is the: Monetary unit assumption. Going concern assumption. Periodicity assumption. Economic entity assumption.
Answer
4.3
(255 Votes)
Amelia
Elite · Tutor for 8 years
Answer
C. Periodicity assumption.
Explanation
This question is asking about one of the fundamental accounting assumptions that underpin the preparation of financial statements. The assumption in question is about dividing the life of a business into smaller, more manageable intervals of time for the purpose of reporting financial information. The monetary unit assumption is the idea that money is the common denominator of economic activity and provides an appropriate basis for accounting measurement and analysis.The going concern assumption is the belief that a company will continue its operations into the foreseeable future and has no intention or need to liquidate.The periodicity assumption is the concept that the continuous life of a business can be divided into time periods, such as months, quarters, or years, and that financial statements can be prepared for those periods.The economic entity assumption is the notion that the business is separate and distinct from its owners and any other business unit.Given these definitions, the correct assumption that relates to dividing the business life into time intervals for reporting purposes is the periodicity assumption.