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 fundamental accounting principle that assumes the economic life of a business can be divided into artificial time periods, such as months, quarters, or years, for the purpose of financial reporting. This assumption allows for the preparation of regular financial statements that show the financial performance and position of a business over a specific period of time.

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