What Is Period Concept

The accounting concept that the financial statements of a company should be produced after regular periods. The profit and loss account and balance sheet are prepared at regular intervals, for example annually, instead of after each transaction or event.

What is the accounting period concept?

Accounting period concept is based on the theory that all accounting transactions of a business should be divided into equal time periods, which are referred to as accounting periods. … Generally an accounting period is of 12 months (1 year). While the time period is fixed, the month can vary from company to company.

Why is time period concept important?

The financial statements of any business tell a story of the business’s activities and their position at a certain point in time. Therefore, the importance of the time period principle is to inform any readers about the time period for which the financial statements have been prepared.