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Joel Shapiro,MBA
Accounting Instructor, Ryerson University, Toronto
Introduction
All active businesses engage in transactions with their
customers, suppliers, lenders, investors, and regulating
authorities every daysometimes every second! For
accounting purposes, a transaction involves the exchange
of financial resources between two parties. U sually cash
is exchanged for goods or services. H owever, it is quite
common for the exchange of cash and the correspond-
ing exchange of goods and services to happen at differ-
ent times. Either can precede the other. For accounting
Joel Shapiro has been an purposes, a transaction is deemed to have occurred, and
accounting instructor at Ryerson
University in Toronto, Canada for
must be recorded, whenever one party has made its
20 years. Previously, he developed exchange. This could be either the receipt or payment of
an accounting and inventory cash, or the receipt or delivery of goods or services.
management software system for
small businesses. In his spare time,
he enjoys working on Kakuro and
The Accounting Issue
cryptic crossword puzzles and travels One of the fundamental assumptions underlying
throughout Ontario as a bridge Generally Accepted Accounting Principles is that of
tournament director. periodicity. Businesses do not have expiry datesthey
can last, in theory, forever. All of us know of companies
which were founded many decades or even c enturies ago
and have long outlived their original founders. H owever,
users of a companys financial statements would like to
be able to assess the companys recent performancein
other words, did the company earn a profit this year, or
last year? This is the essence of periodicitywe artificially
break the companys life into discrete periods, usually a