Accounting Period Concept
Even though a business is assumed to continue forever (going concern assumption) but it is necessary to keep accounts in such a way that the results are known at frequent intervals. This time interval is known as the “Accounting Period”.
While accounting periods might vary in terms of reporting dates but they must be consistent. The various users of accounting information require financial information at regular intervals, so we cannot wait for the liquidation of the company for the preparation of financial statements. Hence, as per the accounting period concept, the financial statements are prepared at regular intervals of time.
XYZ Ltd. refused to prepare books of accounts for the year ended 31 March 2013 saying that according to the concept of going concerned its business is never ending entity and it shall go on forever so it shall not prepare the accounts. But, Mr. B clarified this doubt of XYZ Ltd. by quoting the Accounting Period Concept, thus XYZ Ltd. has to prepare its books of accounts for the year ending 31 March 2013.
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According to The American Institute of Certified Public Accountants “Principles of Accounting are the overall law or rule adopted or proposed as a guide to action, a settled ground or basis of conduct or practice”
Basic Accounting Terms
After going through this lesson, you will be ready to understand the ‘Basic Accounting Terms’ that we commonly use in Accountancy.
3 Fundamental Accounting Assumptions
After browsing this lesson, you shall be ready to understand the subsequent Fundamental Accounting Assumptions: Going Concern, Consistency, Accrual