The accounting period refers to the time period for which accounting books are balanced. The preparation of financial statements is done by business entities to evaluate their financial performance or for reporting to external parties/stakeholders. Every business depends on the accounting period to prepare internal accounts for performance monitoring and external accounts for reporting purposes to external parties. It is the base for how long an accounting cycle will take place. The meaning of an accounting period may depend on the nature of a business. Its duration may depend on the frequency at which the firm wishes to evaluate its performance.
In general, the accounting period is one year. Many business entities, especially those that need financial performance for less than a year, follow the accounting period of 3 months or 6 months. It means that these firms prepare financial statements at the end of every quarter or every half year. There are businesses that need to prepare their financial statements every month for internal accounting. For them, the accounting period is one month. Definition of accounting period duration also changes for the firms engaged in fresh commodities. As they may carry out even weekly accounting periods
International Financial Reporting Standards (IFRS) allow 52 weeks period, instead of one full year, as the accounting period. In other words, an accounting period may be as long as 1 week, 4 weeks, 1 month, 3 months, 1 year, or 52 weeks.
- What is Accounting?
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- Fundamentals of Accounting: Meaning, Principles, Categories, and Statements
- Changes in Accounting Policies – Reason, Disclosure, Exemption and Example
- Management Accounting – Meaning, Definition, Tools, and Limitation
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