Question

Discuss the accounting period concept.

Answer 1

The accounting period refers to the span of time at the end of which the financial statements of an enterprise are prepared. Every organization, according to its needs, chooses a specific period of time to complete an accounting cycle. Generally, the time chosen is a year we call the accounting year. The time period is mentioned in the financial statements.

So the indefinite life of an organization is divided into shorter, generally equal time periods. This facilitates a comparison of performances and allows stakeholders to get timely information. Also in most cases, it is also a statutory requirement.