After Deciding to Record a Business Event, Accountants Use Assumptions

question 117

Essay

After deciding to record a business event, accountants use assumptions and estimates for what purpose?

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Definitions:

Adjusting Entry

An accounting journal entry made at the end of an accounting period to allocate revenue and expenses to the period in which they actually occurred, ensuring compliance with the accrual basis of accounting.

Time Period Assumption

An assumption that accountants can divide the economic life of a business into artificial time periods.

Economic Life

The expected period over which an asset remains useful to its owner or contributes to an enterprise's cash flows.

Artificial Time Periods

A division of operational time into smaller, manageable segments for accounting or reporting purposes, such as quarters or fiscal years.