What is an accounting period

An accounting period is a business's trading time between the successive closings of the books. This is normally a month, three months (a quarter), or a year (a financial year or a calendar year) depending on the management reporting schedule and/or budgets, the income tax year or other regulatory reporting needs.

Shorter accounting periods equals more control

A business may have different accounting periods for different reporting purposes. Internal management reports may be produced using monthly accounting periods - the shorter period allowing for better decision making capacity and therefore more control. 

Shareholders and/or investors in a business may want to compare successive quarterly reports to analyse results more clearly. Financial statements and tax returns are prepared over a fiscal year - that may be a calendar or other annual period that differs depending on the country the business is located in. Public companies may need to report quarterly or annually to the relevant governing reporting bodies. 

Whatever accounting period is used it is imperative to be consistent over time in order to compare results. 

Closing the books

From a bookkeeping perspective transactions should not be entered for prior accounting periods once the books are closed for that period. Once a period is closed, the trial balance is reconciled and reports prepared and checked against budgets. 

It is very important that you do not enter, delete or move transactions in closed off periods as this will affect prior reports and reconciliations and could result in under or over reporting to government bodies.