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Question

During the lifetime of an entity accounting produce financial statements in accordance with, which basic accounting concept?


A
Conservation
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B
Matching
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C
Accounting period
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D
None of these
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Solution

The correct option is A Accounting period
Accounting period refers to the span of time at the end of which the financial statements of an enterprise are prepared, to know whether it has earned profits or incurred losses during that period and what exactly is the position of its assets and liabilities at the end of that period.
 Such information is required by different users at regular interval for various purposes, as no firm can wait for long to know its financial results as various decisions are to be taken at regular intervals on the basis of such information.
The Companies Act 1956 and the Income Tax Act require that the income statements should be prepared annually.

Principles and Practice of Accounting

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