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Period assumption and relevence

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Justanotherhuman:
hey there
could someone please explain how period assumption and relevance is related :)
Thankyou!

Seamus Wong:

--- Quote from: Justanotherhuman on May 01, 2019, 11:06:39 am ---hey there
could someone please explain how period assumption and relevance is related :)
Thankyou!

--- End quote ---

The period assumption and relevance are related since the having reports prepared for particular periods of time on a continuous basis allows for a comparability of results - be it with previous reporting periods or with other firms - which thus provides the business with valuable information about current performance and their general financial position, allowing for more informed decisions to be made, upholding relevance.

- I'm just making the links based off of how I see it, hopefully someone else can provide something more concrete with greater detail.

jurisprudence:
Hey!

The way the two assumptions are related is that the period assumption upholds relevance.
 
The period assumption requires reports to be prepared for a period of time, in order to obtain comparability of results. If the assumption was not adopted, this would mean that the business would continue indefinitely (due to the going concern assumption), and therefore we would never be able to calculate profit and prepare reports such as the Income Statement/Cash Flow Statement. Furthermore, it ensures that only revenue earned and expenses incurred for the period are included, and allows as to distinguish between our current and non-current assets/liabilities.

All of this information is capable of making a difference to the decisions made by users. For example: if expenses and revenues from other reporting periods were included, this would affect the net profit of the business, and therefore alter perceptions of financial performance. How would a user assess overall expenditure on expenses such as wages or advertising if there was reporting periods? Therefore, the reporting period aids the decision-making process, upholding relevance. 

godimikh:

--- Quote from: jurisprudence on May 05, 2019, 02:43:11 pm ---Hey!

The way the two assumptions are related is that the period assumption upholds relevance.
 
The period assumption requires reports to be prepared for a period of time, in order to obtain comparability of results. If the assumption was not adopted, this would mean that the business would continue indefinitely (due to the going concern assumption), and therefore we would never be able to calculate profit and prepare reports such as the Income Statement/Cash Flow Statement. Furthermore, it ensures that only revenue earned and expenses incurred for the period are included, and allows as to distinguish between our current and non-current assets/liabilities.

All of this information is capable of making a difference to the decisions made by users. For example: if expenses and revenues from other reporting periods were included, this would affect the net profit of the business, and therefore alter perceptions of financial performance. How would a user assess overall expenditure on expenses such as wages or advertising if there was reporting periods? Therefore, the reporting period aids the decision-making process, upholding relevance.

--- End quote ---
Fantastic response!

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