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  • 03 Generalization Basic Accounting

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    Kim Ahn Obuyes
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    Continuity, periodicity, and accrual accounting are necessary concepts for a company to account for transactions over accounting periods. Continuity assumes a company will operate indefinitely, periodicity divides a company's operations into equal time periods like months or years to prepare financial reports, and accrual accounting provides information on activities undertaken by recording revenues when earned and expenses when incurred rather than when payment is made.

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    Continuity, periodicity, and accrual accounting are necessary concepts for a company to account for transactions over accounting periods. Continuity assumes a company will operate indefinitely, periodicity divides a company's operations into equal time periods like months or years to prepare financial reports, and accrual accounting provides information on activities undertaken by recording revenues when earned and expenses when incurred rather than when payment is made.

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    6 views1 page

    03 Generalization Basic Accounting

    Uploaded by

    Kim Ahn Obuyes
    Continuity, periodicity, and accrual accounting are necessary concepts for a company to account for transactions over accounting periods. Continuity assumes a company will operate indefinitely, periodicity divides a company's operations into equal time periods like months or years to prepare financial reports, and accrual accounting provides information on activities undertaken by recording revenues when earned and expenses when incurred rather than when payment is made.

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    © All Rights Reserved
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     Why are the concepts of continuity, periodicity, and accrual accounting necessary for a

    company to account for transactions within the duration of accounting periods?


     Continuity means that a business entity will continue to operate indefinitely, or
    at least for another twelve months. It is important because when this concept is
    prepared with the financial statements it will continue to exist in the future,
    unless otherwise stated. The periodicity menas that indefinitely life of an
    enterprise is subdivided into time periods which are usually of equal lengths for
    the purpose of preparing reports on financial, performance and cash flows. This
    concept is important because it enables companies to divide their economic
    activities into short period of time. Accruals are important because they provide
    information about the business activities undertaken by a company.

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