Also known as a financial period, period of account, accounting year, financial year, etc. the period for which a business prepares its accounts is called as the accounting period for that firm.
As per the going concern concept, when a business is started, it is assumed that it will not be dissolved in the near future and will continue to operate for a foreseeable future. Therefore it is required that the lifespan of a business should be divided into equal parts. It is used for financial reporting by the business.
Internally, the company may decide to maintain accounting records monthly, quarterly, etc. However, for external users of accounting information, the financial statements are produced for a period of 12 months. There may be exceptions to this when a business is newly set up or is being dissolved.
Key Features of Accounting Period
- Period of measurements should be equal.
- Maximum 12 months after the start date.
- It may be different from the calendar year.
- It is uniform and consistent.
Accounting Period of Various Countries
Note – Fiscal year, accounting year & calendar year may be different for a company.