An accounting period is a period of time such as the 12 months of January 1 through December 31, or the month of June, or the three months of July 1 through September 30. It is the period for which financial statements are prepared. For example, the income statement and the cash flow statement report the amounts occurring during the accounting period, and the balance sheet reports the amounts of assets and liabilties as of the final moment of the accounting period.
While companies are required to prepare financial statements for each annual accounting period, most companies also prepare financial statements for each monthly accounting period. This monthly feedback can be valuable for the company's management but only if it reflects:
For instance, if a company prepares monthly financial statements, there needs to be adjusting entries as of the last day of every month to:
- accrue expenses and liabilities that occurred but have not yet been recorded. Examples include maintenance, repairs, wages of hourly paid employees, utilities used, property taxes, interest, etc.
- record the depreciation for the 30 days of the month.
- adjust prepaid expenses for the amounts that have expired and to defer the expenses that have not expired as of the end of the month.
Popular accounting software will allow you to specify any period of time and the financial statements will be generated for that period. For example, you could specify a 7-day period. However, if you have not entered adjusting entries as of the last day of that short accounting period, I believe that the financial statements will be more misleading than helpful.