Explain the implications of Accounting Period Principle. With an example if possible.

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According to the Accounting Period Concept, the life of an enterprise is divided into different accounting periods such as, yearly, half-yearly, quarterly, monthly, fortnight, day, etc. It helps in measuring and assessing the performance of a business in each period and at regular intervals.

Usually the accounting period is taken as one year. The accounting period may be a calendar year (i.e. January 01 to December 31) or a financial year (i.e. April 01 to March 31).

For example, M/s. Shruti Traders closes its books of accounts every year on December 31, so the accounting period for M/s. Shruti Traders is from January 01 to December 31.