Period

Definition

A period in financial accounting is a specific duration of time for which financial transactions are recorded and analyzed. Common periods include months, quarters, and fiscal years.

5 Must Know Facts For Your Next Test

1. Periods help in organizing and summarizing financial data for reporting purposes.
2. The length of the period can vary depending on the business's reporting requirements.
3. Transactions must be documented within the correct period to ensure accurate financial statements.
4. Financial statements are typically prepared at the end of each period to reflect the company's performance.
5. Period-end adjustments may be necessary to account for expenses or revenues that have been incurred but not yet recorded.

Review Questions

• Why is it important to record transactions within the correct period?
• What are common durations used as periods in financial accounting?
• What types of adjustments might be made at the end of a period?

Related terms

Fiscal Year: A one-year period that companies use for financial reporting and budgeting, which does not necessarily align with the calendar year.

Accounting Cycle: The series of steps followed during each accounting period to record transactions and prepare financial statements.

Period-End Adjustments: Entries made at the end of an accounting period to update account balances before preparing financial statements.