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Accounting Period

An accounting period is the time frame during which financial statements are prepared, balanced and reported. It may be an annual time period starting from January 1st to December 31st or may start from any other point of the year. The time window may also be a 1 month accounting period (the month of June) or may last from July 1st to September 30th.

According to the International Financial Reporting Standards (IFRS), the accounting period is taken to be a 52-week time frame that may start from any day of the year. This system is called 52-53 week fiscal year in US standards and 4-4-5 calendar in British and Commonwealth.

The IFRS system of 4-4-5 calendar (52-53 week fiscal year) is adopted by firms, majorly when they need their accounting period to end on the same day of each year. This may be any day of the week but is generally taken to be either Saturday or Sunday as it becomes easier to close business activities for counting inventories and other such accounting activities.

Most firms prepare financial statements for every month. This is beneficial in reflecting valuable feedback on company’s performance and management. Although to reap out these benefits, the reports should include:

  • Accrual Accounting
  • The Matching Principle
  • Adjusting Entries

Accounting Cycle

Accounting Period is one of the determining factors in the timeline of different stages of the Accounting Cycle. As the recording activities are run throughout the accounting period while these records are balanced, adjusted and compiled in the form of financial reports towards the end of this period.