Accounting Period

The accounting period is the period between two accounting balances consecutively, that is, the period in which the company exercises its usual activity.

The accounting year of a company usually corresponds to the natural economic year, so that the period of time between two other years, the previous outgoing and the subsequent rising is taken into account. However, the determination of the accounting period varies depending on the countries and even between the companies, so that each accounting period does not have to coincide with the calendar year.

Determination of the accounting year

In turn, accounting or fiscal years are usually divided into months, quarters and semesters, either to assess the trend and analyze the situation of the results such as the perspectives and fulfillment of the objectives. In each subperiod, a month, quarterly and semiannual closure is made that allows collecting all the data for these periods, allowing an overview of the year.

In this way, the accounting exercise becomes important in relation to the presentation of results and information to investors and agents of interest (public administration, shareholder, analysts, partners …) as well as a basic element of study to compare the trend of the company and compliance with the marked strategies.

Differences between countries in the accounting year

It is interesting that in the United States the accounting period goes from October 1 of year X to September 30 of year X + 1, thus being part of two calendar years and coinciding with the fiscal year, which represents the same period for both the public sector as for the public administration of the country. In other cases the accounting periods usually correspond to the calendar year, as in Spain and most of Europe and Latin America, establishing accounting subperiods.

The delimitation of the accounting year is important as it allows collecting data on the activity and results of the companies and in turn analyzing and comparing them with other years. Likewise, the determination of the type of accounting year is important to consolidate the annual accounts in multinational companies, for example, if an American company has an accounting year different from that of its European subsidiary, where they will only coincide in 9 and 3 months in different years .

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