University of Maryland Extension

What accounting period should be used?

Author: 
Dale M. Johnson, Extension Specialist, Farm Management

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An accounting period summarizes revenue and expenses for a given period of time. It can be a calendar year or a fiscal year. A calendar year starts on January 1 and ends on December 31. The year can be further broken into quarterly or monthly periods. The fiscal year lasts for 12 months but begins on a day other that January 1. Fiscal accounting periods can also be broken into quarterly or monthly periods. As a rule, the accounting period follows the production cycle of the major enterprises of the business. For example, most crop and some livestock producers follow a calendar year because the production cycles of these enterprises begin and end during the calendar year and during the winter, the business activity slows somewhat. Farms or businesses should choose an accounting period which best accommodates their production cycle. Most will choose a calendar year.

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