The Periodicity Assumption
Recall that in Chapter Two you were introduced to the Generally Accepted Accounting Principle Periodicity Assumption that financial reports are prepared at yearend, regardless of an economic entity’s operating cycle[1]. An organization’s operating cycle describes how quickly it turns its cash (used to buy or manufacture Inventory) into cash it receives from its customers (including any time to collect Accounts receivable). To illustrate this concept, consider two companies described in Table 4.1.
Table 4 1
