Accountants divide the life of the business into arbitrary time periods of equal length:
A) in order to prepare a balance sheet.
B) in order to calculate comparable profit results.
C) in order to prepare an income statement.
D) because of the accounting entity assumption.

Question

Quizplus · Accepted Answer

Dividing the life of the business into equal time periods allows for the calculation of comparable profit results, which is necessary for analyzing the performance of the business over time. It also allows for accurate preparation of income statements that show the revenue, expenses, and net income for each period. The accounting entity assumption is related to the idea that the business is separate from its owners and other entities, but it is not directly connected to the use of time periods in accounting. The preparation of a balance sheet also requires time periods, but it is not the primary reason for dividing the life of the business into equal parts.

Accountants Divide the Life of the Business into Arbitrary Time