Time period concept

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Time period concept
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Time period concept (also called the accounting period [1]) is one of the three basic accounting principles among going concern and consistency and accruals [2]. Time period concept divides life of business into periods of time (called also intervals) that concerns financial information. There are two basic concepts here [3]:

  • Fiscal year - 12 months of accounting period when books are closed another day than 31th of December,.
  • Calendar year - 12 months of accounting period when books are closed 31th of December each year (if books are closed 31th of December, fiscal year and calendar year are covering each other).

Importance of time period concept for stakeholders

Investors, creditors, bankers, owners and managers use information from accounting periods to access if business has success or failure, in other words - if economic objectives are met or not. Stakeholders are informed regularly - usually monthly, quarterly or annually[4].

Which documents refers to time period concept

The time period concept refers to many documentation used in the company. Based on that records, management raises discussions, and as a result of that operations might be analyzed and economic decision taken. Also paying taxes would be done slightly differently for fiscal year method and calendar year method, however total amount of taxes always remains the same [5]. Documents that refer to time period concepts are mainly financial statements such as [6]:

  • the balance sheet,
  • an income statement,
  • the cash flow statement.

Calendar year versus fiscal year

Usually enterprises can choose more advantageous accounting approach for them: calendar year or fiscal year. There might be different situation with partnerships or limited liability companies where governmental tax policies sometimes determine fact that calendar year accounting policy should be used. Many companies end fiscal year in other months than December which might have reason in seasonality. Below are some examples of branch of companies and their end of fiscal year [7]:

  • January: auto accessories, department stores or hardware stores,
  • February: building contractors, plumbing suppliers,
  • March: warehouses,
  • June: appliances, books, building supplies, furniture, groceries, office equipment, papers, ski shops,
  • September: electrical equipment, garages, real estate agencies.

Author: Jolanta Lesnicka


  1. Allen J. E. (2004), p. 204
  2. Valneva, (2015), p. 13
  3. Albrecht W., Stice J., Stice E., Swain M.(2007), p. 132
  4. Albrecht W., Stice J., Stice E., Swain M.(2007), p. 132
  5. Weltman B. (2010)
  6. Albrecht W., Stice J., Stice E., Swain M.(2007), p. 131
  7. Weltman B. (2010)