EXERCISES E3-1 Chloe Davis has prepared the following list of statements about t

Question

EXERCISES E3-1 Chloe Davis has prepared the following list of statements about the time period Es not be necessary if a company's life were not divided into arti- L 1. Adjusting entries would ficial time periods 2. The IRS requires companies to file annual tax returns 3 Accountants divide the economic life of a business into artificial time periods, but each transaction affects only one of these periods. 4 Accounting time periods are generally a month, a quarter, or a year 5. A time period lasting one year is called an interim period 6. All fiscal years are calendar years, but not all calendar years are fiscal years

Explanation / Answer

Solution:

1. Adjusting entries would not be necessary iif a company's life were not divided into artificial time periods: TRUE

2. The IRS requires companies to file annual tax returns: TRUE

3. Accountants divide the economic life of a business into artificial time periods but each transaction affects only one of these periods: FALSE

4. Accounting time periods are generally a month, a quarter or a year: TRUE

5. A time period lasting one year is called an interim period: FALSE

6. All fiscal years are calendar years but not all calendar years are fiscal years: FALSE

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