- Accounting period refers to the span of time at the end of which the financial statements of an enterprise are prepared, to know whether it has earned profits or incurred losses during that period and what exactly is the position of its assets and liabilities at the end of that period.
- Such information is required by different users at regular interval for various purposes, as no firm can wait for long to know its financial results as various decisions are to be taken at regular intervals on the basis of such information.
- The financial statements are, therefore, prepared at regular interval, normally after a period of one year, so that timely information is made available to the users.
- This interval of time is called accounting period.
- The Companies Act 2013 and the Income Tax Act require that the income statements should be prepared annually.
- However, in case of certain situations, preparation of interim financial statements become necessary.
- For example, at the time of retirement of a partner, the accounting period can be different from twelve months period. Apart from these companies whose shares are listed on the stock exchange, are required to publish quarterly results to ascertain the profitability and financial position at the end of every three months period.
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