Periodicity Concept and Accrual Principle in Accounting

 

Accounting generally has four tasks. These tasks; It is known as recording, classification, reporting and analysis. It is a necessity for an accounting firm in slough specialist to adhere to the periodicity principle 100% while performing accounting transactions. An accounting process that does not act in accordance with the concept of periodicity; will remain incomplete or incorrect.

What is the Concept of Periodicity in Accounting?

It should be noted from the very beginning that the concept of periodicity in accounting is closely related to the concept of business continuity. Business continuity According to the concept, it is not possible to establish a business only for a certain period of time. It is predicted that a business will continue its existence in theory forever. In this context, it should be noted that the existence of the enterprise promises continuity. However, in addition to this, businesses must be evaluated in terms of taxation and accounting in certain periods. Therefore, the existence of the business should be divided into certain periods. Periods must be of equal length. The longest term; it must be 12 months. However, depending on the situation of the business, there may be periods shorter than 12 months. However, it is not possible to evaluate for a period longer than 12 months. A 12-month period is called a financial year in accounting. Fiscal year; It represents the period best accountant in slough between January 1 and December 31. The fiscal and calendar year are the same, with exceptions. Special accounting period; It is the name given to the different fiscal and calendar year. Companies wishing to switch to the special accounting period must obtain permission from the Tax Office. In addition, they must register the situation with the Chamber of Commerce. Monthly or quarterly taxation or reporting is possible outside the fiscal year. To put it briefly; the concept of periodicity in accounting the life of the firm is divided into periods. Effects of Periodicity in Accounting

Periodicity has an important place in taxation in accounting. Because the state requires businesses to calculate tax in certain periods. For example, Value Added Tax; It must be declared on a monthly basis. Withholding tax must be declared monthly or quarterly. It is possible to declare the temporary tax quarterly and the corporate tax annually. Besides, periodicity has accounting effects.

Reporting and Analysis

Every business; creates financial statements by periods. There are some judgments made by each firm from these tables. It is possible to evaluate these judgments to be valid in that period. At this point, it should be said that the income statement and the balance sheet are decisive criteria. Income statement; It is known as the most basic accounting concept. In the income statement, the income and expenses of a company are put one after the other and the profit or loss of the company is revealed. Income statement; It is being prepared for a specific period. The period meant by this period is monthly, quarterly or annual periods. The income statement has to be prepared at least every three months. Some businesses can prepare monthly. Accrual concept is directly related to the income statement. Besides, it should be said that the preparation of the balance sheet is different. Because the balance sheet does not report the transactions within a certain period as in the income statement. Balance sheet expresses the net status of a business on a specific date. For example, when the annual balance sheet is mentioned, the financial situation of the company as of December 31, 2019 will be revealed. It should be said that the balance sheet is closely related to periodicity. The reason for this is the status of the last day of the period, the reporting of the balance sheet.

 Registration and Classification

Registration and classification; It is an important factor cheap accountant in slough in the preparation of financial statements. What data will fall on a company's financial statements; It depends on the registration information and the items to be classified on the financial statements. For example, if a transaction belongs to that period, it must be recorded for that period, whether its invoice is paid or not. These accounts, which ensure the fulfilment of the periodicity principle; are known as accrual accounts .Accrual accounts are divided into two. It is referred to as income and expense accruals account. Periodicity in accounting other than accrual accounts there are other factors that contribute to the principle. Depreciation accounts, expenses / income accounts for the upcoming months or years are among these factors.

 


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