Accounting Period is a duration for which the books of accounts are prepared for any company or any individual. The Accounting Period is that financial period whose all financial transactions are checked and managed to get the profit of that year and from the Balance Sheet of the Company to know its financial strength. The Accounting Period is generally defined as the organisation’s fiscal year.
India has its own Accounting Standards notified by the Ministry of Affairs which are converged with the International Financial Reporting Standards (IFRS) and formulated by the Institute of Chartered Accountants of India. So following that, India’s Accounting Period starts from April and ends in March whereas the top Accounting Firms in Dubai follow the principles which are in conformity with IFRS.
The period of accounting may differ in different countries according to the rules and principles followed by them. Generally the Accounting Period is of 1 year starting from January and ending in December thereby following a calendar year. However, some companies may even start their year from April and end in March instead of following the calendar year. The Accounting Period may not be necessarily of a year. It can be of a quarter as well.
All the important Financial Statements are during this period to determine the exact solvency position of the company. These Financial Statements are of utmost importance as they convey a lot of the profitability, solvency, turnover, liquidity and economic power of the company.
The basic Financial Statements prepared for the Accounting Period are:
- Income Statement
- Balance Sheet
- Cash Flow Statement
Among many definitions of the Accounting Period, one such definition is that it is a period for which the taxpayers determine their income tax liability. However, the series of events taking place have priorities among them. Here is what happens when the company’s Accounting Period ends:
- Transactions are entered into the Journal on their immediate happening as the first step.
- The journal entries are posted in the ledger accounts.
- The balance of each ledger account is then mentioned in the Trial Balance to check for correction.
- Finally, then the major Financial Statements portraying the performance of the company in the past year are prepared.
The companies are also seen to release their reports to SEC (Securities and Exchange Commission)on a quarterly basis. Many companies are even known to prepare their reports monthly i.e. to have an Accounting Period of one month. The Accounting Period should be of such gap so as to ensure that the company adheres to all other Accounting Standards and concepts to prepare correct Financial Statements thereby giving a true and a fair view to its clients and the market.
In today’s era, there is no need for maintaining the accounts manually; instead an Accounting Software is available to prepare all major Accounting Statements with inbuilt calculating functions. What a person can do is enter the Accounting Period in the Software by mentioning the start date and the end date and other necessary entries which are needed to be done.
Thus, they have managed a substantial role to play apart from just being a time span for which reports are made. Also, technically an Accounting Year is applicable only to the Income and the Cash Flow Statements and not on Balance Sheets because it is made for a specific date. It is indeed one of the principal terms which are essential for every company look upon.