Wt's the relevance of accounting period concept in accountin

Accounting is a standardised method to measure the performance of a business entity in monetary terms. To measure, we need to know where to start and where to end. The period, ie. the time from the start to the end, for accounting purpose is called accounting period. With clearly defined accounting period, we know the start and the end, and we know what to cover in our measurement. Anything outside the accounting period is out of our scope of measurement.

Another related concept you need to know is the timing of financial statements. In accounting, we report the performance of a business entity in 3 financial statements: income statement, balance sheet and cash flow statement. It is interesting to learn that income statement and cash flow statement will be prepared in the accounting period. You may notice that the heading of these 2 reports will include "For the year ended 31 December 2007", for instance. That mean the 2 reports measure the business entity covering the year from January 1 (the start) to December 31 (the end). But the heading of balance sheet will include "As at 31 December 2007". As the value of assets and liabilites change as time passes, so we can only report the values as at a certain point of time. And so we take "the end", ie. December 31.

Time covered by financial statements, which can be for any length but is usually annual, quarterly, or monthly.
The purpose is to monitor progress on a weekly, monthly, or quarterly basis.

In terms of taxation, it is the 12-month period a taxpayer uses to determine his or her income tax. The purpose is for Inland Revenue's record.