What is the accounting year? How to classify current accounting periods

What is an accounting year – a question of many people inside and outside the accounting industry. In the accounting and auditing industry, accounting year is a term that frequently appears. They reflect the time period in which accounting operations are performed.

These activities are the regular work of accountants such as receiving information; handling; analysis; Prepare accounting and financial reports for businesses and organizational units. They reflect the entire financial fluctuations and business results of the organization during the accounting period in question.

1. Basic information about the accounting year

1.1. Concept of accounting year

Another term accountants frequently encounter is accounting period. So are the accounting period and accounting year actually the same?

According to Clause 14, Article 3 of the 2015 Accounting Law, the accounting period is defined as follows:

“Accounting period is understood as a defined period of time from the time of recording accounting books to the time of closing books and closing books to prepare financial statements (FS)”.

Thus, essentially an accounting period is another name for an accounting year. You can use these two terms simultaneously without distorting the meaning.

Are accounting years and accounting periods the same thing?

1.2. English accounting year

If you are an accountant working in a multinational company, absorbing English accounting terms is extremely normal. So what is the accounting year in English?

The phrase Accounting Period is the English description of an accounting period or accounting year. Currently, depending on each country, the time period of the Accounting Period may vary more or less.

2. Main characteristics of the accounting year – Accounting period

Enterprises and organizations in Vietnam are divided into many different forms such as joint stock companies, limited liability companies, state agencies… Depending on the specific type, the stage of development, duration of existence as well as policy There are differences in policies and mechanisms.

In organizations and units, accounting data is often divided into many different consecutive periods. This ensures the ability to receive information and process data becomes simpler and more consistent.
The most common accounting year is 1 year. Because this time coincides with the deadline for submitting annual financial reports. The time period of the year is quite flexible, businesses can choose according to the characteristics of each business unit. However, it is necessary to ensure time according to current accounting laws.

In addition, the accounting period may or may not coincide with the solar calendar. This means that the accounting period can end on the day before the last day of the year…

3. Necessary requirements for financial accounting year

Below are 2 basic accounting period requirements that need to be met:

3.1. Consistency in the accounting year

Consistency is shown in the purpose of establishing the accounting year. They serve reporting and analysis of financial and accounting data for businesses and organizations.

Accountants can use the accrual method. It is mandatory to determine the specific accounting purpose at the time of the economic event.

3.2. Relevance in accounting period

This is shown in the determination and compilation of accounting information data in the same period. Reported costs may be incurred costs; Revenue is generated from the operating results of that cost level.

For example, accountants report the cost of goods sold at the same time as the revenue brought by that cost of goods.

Thus, the matching principle demonstrates the completeness between related accounting information in the same period. Note that all data should not span multiple years.

Learn about types of accounting periods (accounting years)

>>>Find out more: Basic of bookkeeping accounting services in Vietnam

4. The role of the accounting year for businesses

Once you clearly understand the concept of what an accounting year is, approaching the importance of the accounting year becomes simpler.

Currently, the accounting year is the time to settle accounts and other financial data. Through data in the accounting period, management and leadership can grasp overall information. These include the situation of capital and asset use; financial operations of an organization.
The accounting year is a point in time to easily calculate data as well as differentiate data of accounting periods. They are considered landmarks to make searching and preserving activities simpler and easier.

Clear classification of accounting periods helps businesses save effort and human resources in searching for books and documents of previous accounting periods.

Accounting data for each period is an important basis for the chief accountant and the board of directors to come up with appropriate financial and business strategies for the next period.

In conclusion, understanding the significance of the accounting year is paramount for effective financial management and strategic decision-making within an organization. With clear delineation of accounting periods and meticulous record-keeping, businesses can streamline their operations and ensure compliance with financial regulations. As you navigate the complexities of financial management, we are honored to introduce S4B’s accounting services as trustful and professional for your business.

Smart Solutions For Business Company Limited (S4B Vietnam)

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