| This concept assumes that, indefinite life of business is divided into parts. These parts are known as Accounting Period. | |
| It may be of one year, six months, three months, one month, etc. But usually one year is taken as one accounting period which may be a calendar year or a financial year |
| As per accounting period concept, all the transactions are recorded in the books of accounts for a specified period of time. |
| At the end of accounting period the financial statements of an enterprise are prepared, to know whether it has earned profits or incurred losses during that period and what exactly is the position of its assets and liabilities at the end of that period |
| In short balance sheet and profit and loss account should be prepared at regular intervals |
| Significance- It helps in predicting the future prospects of the business. |
| It helps in calculating tax on business income calculated for a particular time period. |
| It also helps banks, financial institutions, creditors, etc. to assess and analyse the performance of business for a particular period. |
| It also helps the business firms to distribute their income at regular intervals as dividends |