Accounting Period

AAA

DEFINITION of 'Accounting Period'

The time span in which certain financial events took place. The accounting period is generally a quarter or a year and reflects all of the financial activity that occurred during that time. However, it should be noted that even though accounting periods tend to be generically similar and encompass a like amount of time. The start and end dates of those time periods can be drastically different. Not all companies begin their fiscal year in January. Likewise, not every final quarter ends in December.

INVESTOPEDIA EXPLAINS 'Accounting Period'

While accounting periods vary in terms of reporting dates, they must be consistent. If one accounting period ends on June 30, the next must begin on July 1. From an investing standpoint, the accounting period is important because it lets potential shareholders compare apples to apples and adjust for time-sensitive data. For example, if one is aware that June is traditionally a good month for Acme Widgets, a June sales decline might be viewed as a bad omen. Similarly, a sales increase might be downgraded or at least compared to last June's financial statements to see whether it is significant.

RELATED TERMS
  1. Balance Sheet

    A financial statement that summarizes a company's assets, liabilities ...
  2. Cash Flow Statement

    One of the quarterly financial reports any publicly traded company ...
  3. Accounting

    The systematic and comprehensive recording of financial transactions ...
  4. Quarterly Earnings Report

    A quarterly filing made by public companies to report their performance. ...
  5. Income Statement

    A financial statement that measures a company's financial performance ...
  6. Wealth Management

    A high-level professional service that combines financial/investment ...
RELATED FAQS
  1. How can I use cash flow investing activities to determine if a company is growing?

    It is possible to use a company's cash flow from investing activities to determine if that company is growing by looking ... Read Full Answer >>
  2. What is the difference between work in progress (WIP) and raw materials in accounting?

    Raw materials and works in progress (WIP) are distinct categories in financial accounting for business inventory. Each applies ... Read Full Answer >>
  3. How are the three major financial statements related to each other?

    The information found on the financial statements of an organization is the foundation of corporate accounting. This data ... Read Full Answer >>
  4. When must a company announce earnings?

    The Securities & Exchange Commission (SEC) requires companies to file earnings reports no later than 45 days after the ... Read Full Answer >>
  5. What are some examples of general and administrative expenses?

    In accounting, general and administrative expenses represent the necessary costs to maintain a company's daily operations ... Read Full Answer >>
  6. How do dividend distributions affect additional paid in capital?

    Whether a dividend distribution has any effect on additional paid-in capital depends solely on what type of dividend is issued: ... Read Full Answer >>
Related Articles
  1. Taxes

    3 Retirement Plan Moves To Make Before Year-End

    If you don't know what must be done before December 31 you may miss opportunities - or even pay penalties.
  2. Taxes

    Don't Put Off Your Year-End Tax Plan

    From sales tax deductions to credit reports, check out what items should be on your financial checklist.
  3. Taxes

    3 Common Tax Questions Answered

    We clarify some rules that often puzzle taxpayers.
  4. Economics

    Understanding the Top Line

    Top line refers to a company’s gross sales without any reductions for discounts or returns.
  5. Economics

    What's an Allowance for Doubtful Accounts?

    The allowance for doubtful accounts represents the percentage of the accounts receivable the company expects to write-off as uncollectible.
  6. Fundamental Analysis

    Understanding Activity Ratios

    Activity ratios measure how effectively a business uses its assets.
  7. Investing Basics

    What is Accrued Income?

    In a mutual fund, accrued income is earnings that have accumulated over the year, but have not yet been paid out to shareholders.
  8. Fundamental Analysis

    Explaining the Common Size Income Statement

    A common size income statement expresses each account as a percentage of net sales.
  9. Professionals

    What Does an Auditor Do?

    An auditor ensures that organizations maintain accurate and honest financial records.
  10. Fundamental Analysis

    Calculating the Net Debt to EBITDA Ratio

    Financial analysts typically use the net debt to EBITDA ratio to determine a company’s ability to pay its debt.

You May Also Like

Hot Definitions
  1. Hedging Transaction

    A type of transaction that limits investment risk with the use of derivatives, such as options and futures contracts. Hedging ...
  2. Bogey

    A buzzword that refers to a benchmark used to evaluate a fund's performance. The benchmark is an index that reflects the ...
  3. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
  4. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  5. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  6. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!