Restaurant Resource Group: Why Most Chains Use a 4 Week Accounting Period

However, by spreading the expense over the useful life of the fixed asset, it better matches the expense to its related revenue. What’s important to remember is that if you start using the calendar in April this year, then next April will be the start of the new fiscal year for your company for accounting purposes. That said, many businesses choose to adopt the calendar in May because it makes it easy to maintain the cycle throughout the rest of the year. Accounting period provides business owners the perspective about the profitability of the business on an ongoing basis and helps them make informed business decisions. To enable this, the accountants have developed the periodicity concept. The benefit of using this calendar over a regular calendar is that the end date of the period is always the same day of the week.

Another corporation might have an accounting year that begins on October 1 and ends on September 30. In case a business wants to change from a calendar year to a fiscal year, they would need special permission from the IRS. The Internal Revenue Service (IRS) allows taxpayers to either use the calendar-year taxpayers or fiscal-year for tax reporting. Get up and running with free payroll setup, and enjoy free expert support.

What Are the Types of Accounting Period?

Another important reason why merchants like the calendar is that it’s easy to adapt. Plus, if you want to make the calendar monthly, all you have to do is add an extra day to the end of each month. If you’re looking for a calendar that’s easy to use, easy to stick to, and easy to explain, then the calendar might be the best option for you. You simply need to divide the four quarters of the year into 13-week periods. You can make the first segment of each period four weeks long, or five-weeks long.

The period assumption provides stakeholders with reliable and relevant financial information to make timely business choices. Our most successful restaurants are on a 13-week accounting period also known as a week accounting period instead of monthly https://kelleysbookkeeping.com/reporting-stockholder-equity/ reporting. A accounting period or 13-week accounting period, breaks the year up into 4 quarters of the year with 13 weeks in each quarter. Each quarter will have two 4-week blocks followed by a 5-week block, hence the term week accounting period.

Requirements for Accounting Periods

This annual accounting period imitates a basic 12-month calendar period. So, you can have a period, a period, or the period that we are looking at in this article. The fiscal year refers to an annual period that does not end on December 31. The International Financial Reporting Standards (IFRS) allows 52 weeks Purpose & Perks Of Your Business Having 13 Accounting Periods as an accounting period. There are many companies that follow the 52 or 53 weeks fiscal calendar for their financial tracking and reporting. With these and other shortcomings inherent in monthly P&Ls, many restaurants, nearly all the larger chain operators, prepare their financial statements every four weeks.

• According to the Accounting Period Concept, accounting activities should be separated into smaller intervals to measure business performance.
• They can also use accounting periods to compare the performance of two or more companies during the same period of time.
• Accounting periods can be monthly, quarterly, weekly, or daily.
• Also, Sunday night is when inventory should be at it’s lowest level of the week.
• What’s important to remember is that if you start using the calendar in April this year, then next April will be the start of the new fiscal year for your company for accounting purposes.
• Harold Averkamp (CPA, MBA) has worked as a university accounting instructor, accountant, and consultant for more than 25 years.