Types of Accounting Periods

What is Accounting Period Concept?

Accounting period concept tells the business to record all the transactions for a given accounting period for recording and analysis. Accounting period concept states that all the transactions that occur in a business should be divided into periods. This concept helps in the determination of profit and loss of a particular period and its comparison with the previous year and forecasting the figures for next years. An accounting period can be weeks, months, quarters, or even years....

Types of Accounting Periods

Accounting Periods can be of two types, Calendar year and Fiscal year. The two are explained below,...

Requirements of Accounting Period

1. Accrual Method of Accounting: This method of accounting is a must in the accounting period concept. Accrual method of accounting tells the business to record the expenses and revenues as and when they occur and not necessarily when the monetary transactions happen concerning them. The focus of this method of accounting is to record the transactions irrespective of the time of monetary exchange....

Advantages of Accounting Period Concept

1. Financial Statements: Accounting Period Concept helps in the preparation of financial statements like Trading A/c, Profit and Loss A/c, Balance Sheet, Income Statements, etc....

Limitations of Accounting Period Concept

1. Inconsistent Reporting: Accounting Period can vary from company to company and sometimes within the company. Reporting of financial statements by following different accounting periods may not be very useful....