Periodicity concept

  • This is also called the concept of denite accounting period.
  • As per ‘going concern’ concept an indenite life of the entity is assumed.
  • For a business entity it causes inconvenience to measure performance achieved by the entity in the ordinary course of business.
  • If a textile mill lasts for 100 years, it is not desirable to measure its performance as well as nancial position only at the end of its life.
  • So a small but workable fraction of time is chosen out of innite life cycle of the business entity for measuring performance and looking at the Fnancial position.
  • Generally one year period is taken up for performance measurement and appraisal of Fnancial position. 
  • According to this concept accounts should be prepared after every period & not at the end of the life of the entity.
  • Usually this period is one calendar year.
  • We generally follow from 1st April of a year to 31st March of the immediately following year.
  • This concept makes the accounting system workable and the term ‘accrual’ meaningful.
  • There cannot be unpaid expenses and nonreceipt of revenue.
  • Accrued expenses or accrued revenue is only with reference to a nite time-frame which is called accounting period.
  • Thus, the periodicity concept facilitates in:

(i) Comparing of nancial statements of dierent periods

(ii) Uniform and consistent accounting treatment for ascertaining the prot and assets of the business

(iii) Matching periodic revenues with expenses for getting correct results of the business operations

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