Uniform accounting periods: an historical review and critique

Abstract

The practice of "closing" company ledgers each year and producing annual balance sheets and income statements is firmly established around the world. However, although annual balancing and closing of accounts has been common in Europe for at least 500 years, it was not universally adopted until the beginning of the twentieth century. This paper posits the contention that, in certain circumstances, it is appropriate to sacrifice uniformity in favour offlexibility. The argument is illustrated by reference to insurance and mining companies which, especially prior to 1914, had the characteristics of single ship ventures. For them the concepts of accounting periodicity and matching were less relevant than in other industries and annual accounts were of questionable value. By detailed examination of company reports and by bringing together the arguments of prominent accounting thinkers it is shown that, on the question of periodicity, a "one sizefits all" approach is potentially damagingly restrictive.