The time period assumption states that the economic life of a business entity can be divided into artificial time periods.

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The time period assumption is a basic accounting principle that assumes that the economic life of a business can be divided into specific time periods, such as months, quarters, or years, for the purpose of financial reporting. This enables businesses to track their performance over time and produce financial statements that are more useful for decision-making.

The Time Period Assumption States That the Economic Life of a Business