Periodic Reporting Concept in Accounting
Here in this Free accounting tutorial blog we will discuss about Periodic Reporting Concept in Accounting that will help you to understand:
- What is periodic Reporting Concept in Accounting
- Meaning & Definition of Period Reporting
- Time Period Concept in Accounting
- Fiscal Year in Accounting
- Calender Year in Accounting
Whether a small or large business organization, all have to prepare financial statements for their internal and external use to make proper economic decisions and planning. If the organization is a small one then owners particularly need information time to time to analyze his business strengths, weaknesses and possibilities. If the organization is large one then other interest group like bank, insurance company, tax authority, possible investors, all would need update financial reports to judge company’s financial position and operating result as timely basis.
In reality it is quite impossible to judge a company’s success or failure in a particular period of time. An owner or manager cannot wait for 5 or 10 or 20 years to know their financial condition. That is why time period concept has been introduced in accounting. Time period concept in accounting is a idea that suggests that life of a business should be divided in into shorter period of time so that accounting information can be produced as timely basis. Generally in most organization, 12 months period is taken as a standard which is known as Fiscal Year. Another concept that is quite related is called Calendar Year. which is also a 12 month reporting period which must be ended on 31st December whereas in Fiscal Year reporting, there is no particular rule regarding the last date of the reporting.
Most of the large organizations follow Fiscal year concept. But they generally follow July to June time line to provide report to their stockholders. Small organizations also follow Fiscal Year reporting concept but generally they follow Calendar year reporting concept.
Periodic reporting is very essential for any organization’s success since it gives the idea about the financial stability of an organization. But in stead of preparing report once in a year, many organizations prepare internal reports as monthly or even weekly basis. As business changes every day so preparing reports for shorter period of time helps them to remain updated about assets, liabilities, possibilities etc. It is worth mentioning that accounting reports guide an accountant to take decisions on the basis of judgment and estimates but limitation of the accounting reports should also be kept in mind otherwise a company have to suffer in a long run.