The time period assumption states that

Question

Quizplus · Accepted Answer

The time period assumption is based on the idea that the economic life of a business can be divided into artificial time periods, such as months, quarters, or years. This allows for the preparation of financial statements that provide information for specific time periods, which is useful for decision-making purposes. Therefore, option D is the correct choice. Option A is incorrect because a transaction can affect multiple time periods. Option B is incorrect because estimates may be necessary to properly allocate the effects of a transaction across time periods. Option C is incorrect because adjustments may need to be made in subsequent time periods to ensure accurate financial reporting.

The Time Period Assumption States That