The use of deferrals and accruals is a direct result of the:
A) unit-of-measure assumption.
B) time period assumption.
C) cost/benefit constraint.
D) separate entity assumption.

Question

Quizplus · Accepted Answer

The time period assumption states that financial information should be reported over regular periods of time, such as months or years. Deferrals and accruals are accounting techniques used to make adjustments for transactions that span multiple time periods. Deferrals involve recognizing revenue or expenses at a later time than when the cash is received or paid, while accruals involve recognizing revenue or expenses before the cash is received or paid. These techniques are required to ensure that financial statements accurately reflect the financial condition of the company over the relevant time periods. Therefore, the use of deferrals and accruals is a direct result of the time period assumption.

The Use of Deferrals and Accruals Is a Direct Result