TIME PERIOD PRINCIPLE OF ACCOUNTING

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ALL ABOUT ACCOUNTING :- 17th BLOG

      ☆☆☆☆☆ACCOUNTING☆☆☆☆☆

Hi freinds 🙏.,
           Today's discuss 12th accounting principle.

So let's discuss... 

  ★ TIME PERIOD :- 
The time period principle (or time period assumption) is an accounting principle which states that a business should report their financial statements appropriate to a specific time period. ... In financial terms, a time period is often referred to as the accounting year, or accounting and reporting time periods.
                    
  * Requirement of time period :- 
The users of financial statements need current and reliable information to evaluate financial performance and position of the companies to make important decisions and take appropriate actions. The time period assumption enables companies to divide their economic activities into short time periods.

  * Types of accounting period  :- 
Mainly  two types of time period :- 
📆Calendar  year :- the normal period begins on January 1 and ends on December 31 of the same year.

Financial yearyear. 
the accounting period begins on 1st april and ends on 31st march of the next year. 

 * Why do accounts  divide the  business into specific time period? 
Ans:- The time period assumption in accounting allows a company's activities to be divided into informal time periods so it can produce financial information which individuals can use to make decisions. ...  can also prepare financial information more frequently than once a year.

* Why is 1st April financial year? 
Ans :-  India being an agricultural economy, revenue generally depends on the unpredictable outcome of the main crop being ripe in February / March. India enacted the Income-Tax Act in 1961. The Act came into force from April 1, 1962 and that's why our financial year begins on April 1 every period. 

 * 12 months of accounting period :- 
An accounting period is the span of time covered by a set of financial statements. ... If the accounting period is for a twelve month period ending on 31 march  the accounting period is called a fiscal year, as opposed to a calendar year.

 * Why 13 months of accounting period :- 
the main reason for an accounting system to have 13 months is that most users do not want to complete financial year end until well into a new year. 

* Importance of time period  in accounting :- 
The accounting period is useful in investing because potential proprietor, partner, director or shareholders analyze a company's performance through its financial statements that are based on a fixed accounting period.





★Remaining 5 learning section discuss in 18th blog...★
                           
                         ★So wait my 18th blog.....★

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