Accounting Period is an economic term that refers to the period for which an entity prepares its financial statements. It is a continuous period of twelve consecutive months, unless stated otherwise. Individual accounting periods must be consecutive, i.e. follow one after another.
There are two kinds of accounting periods:
- Calendar Year - the accounting period begins on January 1 and ends on December 31 of the same year
- Fiscal Year - the accounting period begins on the first day of any month other than January
Individual accounting periods may be extended or shortened when shifting from one type to the other.
Use of the accounting period in practice: An accounting period is a term used in accounting, each accounting unit has its own set accounting period.