Q. 3-4RQ

Question

What is a fiscal year? Why might companies choose to use a fiscal year that is not a calendar year?

Step-by-Step Solution

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Answer

Fiscal year is the accounting period of twelve months, which is used to prepare financial statements. Low point in business activity enables company to choose fiscal year other than calendar year.

1Explanation on Time Period Concept

As per the time period concept, it is assumed that activities of the business can be divided into small time segments such as quarter, month or year.

2Explanation on Fiscal Year

Fiscal year is used to report the performance of the business for the particular period, normally it is of twelve months.

Generally, business has lower business activity at year end, but in case of retailers such as Wal-Mart Stores Inc, low business activity comes after the month of December which is normally holiday month.

Q.3-1RQ

Q. 3-2RQ

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Q.3-3RQ

Which accounting concept or principle requires companies to divide their activities into small time segments such as months, quarters, or years?

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Q.3-1RQ

What is the difference between cash basis accounting and accrual basis accounting?

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Q. 3-2RQ

Which method of accounting (cash or accrual basis) is consistent with Generally Accepted Accounting Principles?

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Q. 1SE-b

The Pink Peonies Law Firm prepays for advertising in the local newspaper. On January 1, the law firm paid $3,000 for 10 months of advertising. How much advertis

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