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