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P2 C6 Conventions, Assumption. Concepts and Principles ofAccounting — Account STD 11 Commerce — Question

Gujarat BoardEnglish MediumSTD 11 CommerceAccountP2 C6 Conventions, Assumption. Concepts and Principles ofAccounting3 Marks
Question
Write short-note on: $(1)$ Accounting Period Concept:
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Answer

This concept is also related to going concern concept. The going concern concept implies that the business activities will continue for a very long time. Therefore to get idea of profit or loss of the business, one has to wait upto its total closure or liquidation. But it is not possible for the stake holders of the business to wait for such a long period. So, the life of the business is divided into specific accounting period which is known as accounting year. Generally, accounting period is kept for $12$ months. Because the period of $12$ months covers the effect of various seasons on the business. Therefore, theaccounts are also known as annual accounts. Such an accounting year could be a calendar year, a samvat year a financial year, co-operative year or any other period. In India, according to Income Tax law, business (assesses) are required to furnish the details of income for income tax purpose for every financial year i.e. for a period of $12$ months starting from $1^{\text {st}}$ April and ending on $31st$ March next year. All listed companies in India publish interim quarterly financial reports by preparinginterim accounts which become useful to investors in their investment decisions. In this case, the accounting period is of $3$ months. Some enterprises prepare monthly accounts for their internal use and in that case accounting period could be a month. Thus, whenever accounts are prepared at interval of a particular period, such period is known as accounting period and this concept of preparing accounts at regular interval is also known as periodicity concept.

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