The time period assumption states that
A) a transaction can only affect one period of time.
B) estimates should not be made if a transaction affects more than one time period.
C) adjustments to the enterprise's accounts can only be made in the time period when the business terminates its operations.
D) the economic life of a business can be divided into artificial time periods.

Question

Quizplus · Accepted Answer

The time period assumption states that the economic life of a business can be divided into artificial time periods, such as months, quarters, and years, to provide timely and relevant information to users of financial statements. Therefore, choice D is the best answer. The other choices are incorrect. A transaction can affect multiple time periods, estimates may need to be made for transactions affecting multiple periods, and adjustments can be made to accounts beyond the termination of a business.

The Time Period Assumption States That