What is an Accounting Period of a Company?
An accounting period is a time frame set by the business owners. The time frame is used for financial reporting. All the transactions that fall within this date range will forms part of the statements and reports for that accounting period.
An accounting period is a specific time frame for accounting tasks, such as a year, month, or week. Businesses create accounting periods for reporting and analyzing purposes, and the accrual method of accounting enables consistent reporting.
There are various accounting periods based on the business tasks being handled. For example:
- Annual Financial Statements – 12 month accounting period
- Value Added Tax submissions – either 1 or 2 month accounting period (based on revenue bracket)
- Income Tax – Based on 12 month accounting period
- Payroll Tax – based on 1 month accounting period
No hard and fast rule exists on the accounting period an entity chooses for their annual financial statements.
It is recommended to choose a February year end so as to correlate with the February year end of Individuals. This simplifies the reporting process. There are entities with a June 30 or December 31 annual accounting period.
No matter the accounting cycle it is ideal to match the financial information on the balance sheet from the fiscal year to the tax year of assessment.
Frequently asked questions
How long is an accounting period?
Dependent on the area of work it relates to. However, it can be weeks, months, quarters or even calendar years.
What is International Financial Reporting based on?
International financial reporting is based on IFRS or IFRS for SME's. Financial data must be processed, organised and reported on as per the standards of IFRS.
What is an accounting period example?
A company processes its transactions from 1 July to 30 June. This company's accounting period is one year with a year end of 30 June.
What Are the Types of Accounting Period?
- The Calendar Year. The accounting period typically runs from January 1 to December 31, following the Gregorian calendar year
- Fiscal Year. The fiscal year refers to an annual period that does not end on December 31
What are the 5 basic accounting cycle?
Defining the accounting cycle with the following steps:
(1) Financial transactions,
(2) Journal entries,
(3) Posting to the Ledger,
(4) Trial Balance Period, and
(5) Reporting Period with Financial Reporting and
(6) Auditing.
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