Cycles do not just dictate the flow of seasons, the recycling process, or life itself. They are also an essential aspect of our society’s financial and economic structure. Companies are required to cyclically report their financial and accounting documents to governing bodies and the public, as a means to communicate and regulate business dealings.
A reporting cycle is the specified time when a business’s financial statements must be recorded and analyzed by internal and external entities to understand its current standing. The cycles are made up of different reporting periods, also known as accounting periods.
When and How Long are the Financial Reporting Cycles?
These financial cycles typically fall under four periods of time. These time frames refer to the different types of reporting periods, as reported on a:
- Monthly basis
- Quarterly basis
- Biyearly basis
- Yearly basis
The calendar year, fiscal year, and reporting year
Annual reporting covers 12 months. If it is measured from January to December, this is a calendar year. Suppose the cycle falls outside December 31; this is referred to as the fiscal year. Such annual periods typically run from March to February or April to March. Corporations can decide for themselves what fiscal year will work best for their reporting.
The reporting year is the year in which the accounting report takes place. The date, year, and accounting period should always be stated within your financial statements each period.
What are the financial reporting cycles relevant to your industry?
Your business’s reporting timeframe will differ depending on the company’s structure, how much revenue it generates, and what kind of industry it is related to. These authorized reporting periods are as follows:
- Monthly Reports: For businesses whose revenue generation is greater than $6 million for a fiscal year or fiscal quarter
- Quarterly Reports: For businesses whose revenue generation is $6 million or less in a fiscal year
- Annual Reports: For businesses whose revenue generation does not exceed $500,000 for a fiscal year
Many seasonal businesses will also opt to report their finances at the end of a fiscal year instead of a calendar year. For example, retail stores will typically file their annual reports in a fiscal year that ends in February so that they can capture their busy season’s revenue generated in December and January.
Why do Reporting Cycles Matter to Businesses?
All financial documents and business information provided in accounting periods must be up to date and reliable. Accurate, current records are paramount to understanding the state of a company for both internal purposes and external scrutiny by governing bodies.
Owners or managers of a company use these records, created using the accounting cycle, to discover the overall standing within the market, measuring performance, working capital, net income, and business output. Dividend accounts, ledger accounts, journal entries and adjustments, and financial statements must therefore be error free.
Financers, investors, and stockholders need to be informed of these reports as the company’s state directly impacts them. That’s why it’s so important to ensure that all financial statements, including your business’s income statement, balance sheet, cash flow statement and statement of retained earnings are correct.
External entities, like governing and licensing bodies, must have access to these reports to ensure that companies follow proper protocol and regulations. Strict regulations keep businesses transparent in their working relationships with others.
One such set of standards that helps govern the reporting cycle, and sets out guidelines for the preparation of financial statements and reports is the International Financial Reporting Standards or IFRS. This independent global organization has dictated a set of guidelines on the way a company records all transactions, creates statements, and files their reports at the appropriate time.
The Canada Revenue Agency, or CRA, is a department within the Government of Canada, which also dictates how financial reporting is filed, such as income tax returns, of a business. Every year companies will need to file returns with the CRA following their common reporting standards.
End of the reporting cycle
A reporting cycle ends when a business has created its necessary financial statements and has published them to the public. Before publishing, a business will need to double and triple check the information to ensure that all statements and company data are correct and accurate before the specific due date.
Typically, this responsibility falls to an auditor who looks over the completed financial statements for adjustments before publishing them to the public. Auditors will cross-reference the accounting data with the statements to guarantee that they have depicted an accurate representation of their financial position. Once completed, the auditor will sign off on the documents and release them to the public, investors, and possible shareholders.
How long is a reporting period?
The typical reporting timeframe of a company for internal purposes lasts for a month, a quarter, or a year, depending. External reporting timeframes for businesses usually cover a whole year. The same period dates are used every year to accurately compare the data reported each interval.
Why does accounting have regular reporting periods?
Regular reporting periods ensure companies stay up to date on their financial records, allowing for internal and external analysis of their findings. This system is a uniform and regulated activity across all businesses.
What are the five accounting cycles in a reporting period?
An accounting cycle is the process by which a business accounts for their finances. The five accounting cycles each cover specific steps in the financial activity of a company and are part of the preparation process of every reporting interval. They are as follows:
- Financial transactions
- Recording journal entry and adjusting entries
- Posting to the ledger, or T accounts
- Trial balance period
- Reporting period
Reporting Periods and Your Small Business
Reporting cycles, like seasons, are always coming and going, making it a necessary demand that your business must adhere to. Guaranteeing your financial statements are ready for the upcoming cycle can help you analyze your company’s overall performance and reach its full potential while ensuring the business follows all regulations and best practices.
QuickBooks Online has the tools and techniques to help you with your business, recording all transactions and generating financial statements and reports. Keep up to date on your company’s financial statements with a professional accounting system before your next reporting cycle comes around.
Try Quickbooks accounting software free today.