Accounting Period

What is an 'Accounting Period'? - A Quick Guide!

In its simplest form, an accounting period is a linear length of time ending at a specific date upon which the preceding business transactions, from the period starting date up to and including the end date are collated into an 'account' to arrive at a conclusion.  The amounts recorded during the period will principally include sales transactions (sales invoices, etc.) and purchases (purchase invoices, receipts, etc.), although there are, of course, many other relevant items, such as employment transactions, capital transactions, etc. carried out during the period which will affect the final result.  When using the 'accruals' basis of accounting, transactions from the previous period are brought in to the current period and transactions from the current period carried forward into the next, however, because the periods are defined, everything is neatly framed for clarity.  

Usually, an accounting period is 12 months, however, this can vary, particularly when a business commences, or ceases.

The 'basis period' is the section of the accounting period subject to a tax calculation in a particular tax year and, until recently, the accounting period could have substantially 'crossed' the tax year end on 5th April, creating separate 'basis periods', however, this is now subject to reform in order to bring accounting periods in line with the tax year.  This reform principally affects the self-employed and Partnerships and is covered in detail our article 'Basis Period Reform'.