Accounting Period
Definition
The span of time over which financial performance is measured and reported, such as a month, quarter or year. Consistent periods make results comparable across time.
Related Terms in Accounting Principles
Accrual vs Cash Basis
The two main accounting methods. Accrual basis records revenue when earned and expenses when incurred; cash basis records them only when money moves. Accrual gives a truer picture of performance, while cash basis is simpler.
Conservatism Principle
The accounting convention of recognising expenses and liabilities as soon as they are probable, but recognising revenues and gains only when reasonably certain. It avoids overstating the financial position.
Consistency Principle
The convention that a business applies the same accounting methods from period to period, so results are comparable over time. Changes are allowed but must be disclosed and justified.
Historical Cost Principle
The convention that assets are recorded at their original purchase cost rather than current market value. It gives a verifiable, objective basis for the accounts, though it can understate the current worth of long-held assets.
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