Question

Which of the following is a time span in which the total life of a business is divided for the purpose of preparing financial statements?

• A. Fiscal year
• B. Calendar year
• C. Accounting period
• D. Accrual period

Answer 1

Answer: (C)

Accounting period

According to the going concern concept, it is assume that the life of the business is indefinite. Once the business commenced, it will run forever. There will be no intend to close the business until it goes into liquidation.

As the life of the business is indefinite, the accounting records must be kept for a specific period of time to know the state of affairs of the business. This period is normally of 12 months and called as an accounting period.