The time period assumption is the rule that activities can be divided into separate time periods and thus be measured according to their placement in these periods. The time period assumption affects an accountant’s analysis of business transactions because everything has to be recorded according to the specific dates that services are given, payments are received, and payments are made. All accounting entries should be recording on the balance sheet or income statement in the correct time period.
Example: if a bill in paid in March, You cannot report that is paid in July. Your bill date and payment date would not be corresponding. This process would affect the time period concept.