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Explain accounting period in finance and accounting.
Accounting period is a time frame in which, business financial activities are summarised. It can be yearly, mid-year or quarterly.
Accounting period is useful to analyse company performance through its financial statements. A public held company must report to Securities and Exchange Commission (SEC) on quarterly basis.
If the 12-month accounting period ends other on December 31st then, that period is called fiscal year. Accounting period only limited to income statement and statement of cash flows.
Advantages of accounting period are −
- Preparation of financial statements.
- Maintains business records.
- Valuation of business.
- Decision making.
- Evidence in legal matters.
Limitations of accounting period are −
- It measures only things/events that have a monetary value.
- No future assessment.
- Fails to take into considerations factors like inflation, price change etc.
- There are no global standards in accounting policies.
- All accounting policies are not same; confusion will arise in following.
- Possibilities of human errors, manipulation of accounts.
- Allocation problems.
- Restrain of accounting principles.
Requirements of accounting periods are −
- Matching principle.
- What is payroll accounting in finance and accounting?
- Differentiate between finance and accounting.
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- Describe the term amortisation in finance and accounting.
- Explain cash based accounting.
- Differentiate cash accounting and accrual accounting.
- What are the sources of fund in finance and accounting?
- What is matching concept in finance & accounting?
- Differentiate between cost accounting and financial accounting.
- Differentiate between accounting standards and accounting concepts.
- Compare between accounting concepts and accounting convections.
- What is accounting and derive accounting equation?
- Explain the difference between accrual base accounting vs cash based accounting.
- Explain about income statement in accounting.
- Explain about balance sheet in accounting.