Question

What is the periodicity assumption? Companies should recognize revenue in the accounting period in which services are performed. Companies should match expenses with revenues. The fiscal year should correspond with the calendar year. The economic life of a business can be divided into artificial time periods.

Answer 1

Answer:

The economic life of a business can be divided into artificial time periods.

Explanation:

Generally the accounting period is a calendar year, or in case if it is not the same then it is the period of 12 months. Although sometimes the management wants to take decisions based on short time period than the actual accounting year.

Accordingly in the accounting world based on this assumption the companies tend to make accounting records even for such desired period. Accordingly it assumes to divide the accounting period into artificial time periods.