An accounting period is a specific and consistent duration of time that is used to record and compile financial transactions into financial statements. The most common accounting periods include monthly, quarterly, and annually. this period is crucial because systematic and chronological recording analysis and reporting of financial data is done on this basis.
So, the accounting period is a time frame for keeping the score of business activities. it captures all financial events that is money earned, spent, owned, and owned during that period. At the end of the period, a sum is done to see how the business performed financially.
This concept of the accounting period is important in economics for financial reporting, analysis, and comparison. It helps businesses, investors, and regulators to understand financial performance over set periods which enables them to make informed economic decisions, assess the trends, and comply with legal and regulator reporting requirements.
A small business prepares the financial statements every year starting on April 1 and ending on March 31. This accounting period helps them to assess their performance every year and also plan for taxes. On the other hand, a publicly traded company often reports its financial results every quarter so that the investors get regular updates about the performance of the company.
Source: A to Z of Economics by Dr. NC Raghavi Chakravarthy