Even though it is assumed that business will continue to exit for a long time, it is necessary to keep accounts in such a manner that the results are known at frequent intervals. Generally business concern adopt twelve months period for measuring the income of the concern.
This time interval is called ‘Accounting Period’. At the end of each accounting period an Income and Expenditure Account and Balance Sheet are prepared. The Income and Expenditure Account disclose the income or loss sustained by the business during the accounting period. Similarly balance sheet reveals the financial position of the business on the last day of accounting period.