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Periodicity Concept and Revision Video Lecture - Commerce
FAQs on Periodicity Concept and Revision Video Lecture - Commerce
| 1. What is the periodicity concept in accounting? |  |
Ans. The periodicity concept in accounting refers to the practice of dividing the financial activities of a business into specific time periods, usually one year. It assumes that the economic activities of a business can be measured and reported accurately within these time periods.
| 2. Why is the periodicity concept important in accounting? | |
Ans. The periodicity concept is important in accounting as it allows businesses to provide regular and timely financial information to stakeholders. By breaking down financial activities into periods, such as months, quarters, or years, it enables easier evaluation of performance, analysis of trends, and comparison of financial data.
| 3. How does the periodicity concept affect financial statements? | |
Ans. The periodicity concept significantly influences the preparation of financial statements. It requires businesses to report financial information and transactions within specific time periods, resulting in the creation of income statements, balance sheets, and cash flow statements for each period. These statements provide a snapshot of the company's financial position and performance during a particular period.
| 4. Can the periodicity concept be changed or modified? | |
Ans. The periodicity concept is a fundamental accounting principle and is generally not subject to change or modification. It is a standard practice followed by businesses to ensure accurate and consistent reporting of financial information. Deviating from this concept could lead to inconsistencies in financial reporting and hinder comparability among different entities.
| 5. How does the periodicity concept relate to the accrual basis of accounting? | |
Ans. The periodicity concept is closely related to the accrual basis of accounting. While the periodicity concept focuses on dividing financial activities into specific time periods, the accrual basis recognizes revenues and expenses when they are earned or incurred, regardless of when the cash is received or paid. Together, these concepts ensure that financial information is reported accurately and matches the economic activities of the business.
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Nov 08, 2024 Last updated |
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