Accounting Period

Accounting Period is a defined time frame during which a business records its financial transactions and prepares financial statements. In the Philippines, accounting periods typically follow either a calendar year (January 1 to December 31) or a fiscal year approved by the Bureau of Internal Revenue (BIR) and Securities and Exchange Commission (SEC).

Definition

An accounting period establishes the boundaries for measuring financial performance and preparing reports such as the income tax return, financial statements, and tax compliance documents. The period must span 12 consecutive months but does not necessarily align with the calendar year.

For real estate businesses, the accounting period determines when to recognize revenue from property sales, compute tax obligations, and report commissions to agents.

Types of Accounting Periods

Type	Duration	Common Use
Calendar Year	January 1 – December 31	Default for most Philippine businesses
Fiscal Year	Any 12-month period	Corporations with seasonal revenue patterns
Quarterly	3 months	BIR quarterly tax filings
Monthly	1 month	VAT returns, payroll reporting

Calendar Year vs Fiscal Year

Calendar Year:

• Runs from January 1 to December 31
• Default accounting period under Philippine tax law
• Required for individuals and most sole proprietorships
• Simplifies compliance with standard BIR deadlines

Fiscal Year:

• Any 12-month period ending on the last day of a month other than December
• Requires BIR approval through BIR Form 1905
• Common endings in the Philippines: March 31, June 30, September 30
• Used by corporations with business cycles that don't align with the calendar year

BIR Filing Requirements by Period

The BIR requires different filings based on accounting period type:

Filing Type	Deadline	Applicable Period
Quarterly Income Tax Return (Form 1701Q/1702Q)	Within 60 days after close of each quarter	Quarterly
Annual Income Tax Return	On or before the 15th day of the 4th month after close of taxable year	Annual
Monthly VAT Return (Form 2550M)	20th day of the following month	Monthly
Quarterly VAT Return (Form 2550Q)	25th day after close of quarter	Quarterly

Changing Your Accounting Period

To change from calendar year to fiscal year (or vice versa), you must:

1. File BIR Form 1905 – Application for registration information update
2. Submit to SEC – Corporations must amend their by-laws and file with SEC
3. Obtain BIR approval – Wait for confirmation before implementing the change
4. File a short-period return – Cover the gap between old and new period endings

Short-Period Return: When switching accounting periods, the transition period may be shorter than 12 months. You must file a return covering this short period with income annualized for tax computation purposes.

Accounting Period in Real Estate

For real estate brokers and developers, the accounting period affects:

• Commission Recognition: When broker commissions are recorded as income
• Revenue Recognition: When property sales revenue is booked (completion method vs percentage-of-completion)
• Tax Planning: Timing of expenses and income to optimize tax liability
• Financial Reporting: Preparation of audited financial statements

Real estate transactions often span multiple accounting periods. A pre-selling unit sold in December may not be turned over until the following year, requiring proper revenue recognition across periods.

Common Fiscal Year Endings in the Philippines

Month	Typical Users
March	Retail businesses, schools
June	Agricultural companies, educational institutions
September	Technology firms with US parent companies
December	Default for most businesses

Relevance to Tax Compliance

Your accounting period determines critical tax deadlines:

• Expanded Withholding Tax remittances align with your period
• Documentary Stamp Tax on property transfers follows transaction dates
• Capital Gains Tax is due within 30 days of sale, regardless of accounting period
• Annual BIR Form 1702 deadline depends on your fiscal year end

Real estate platforms with accounting software integration help brokerages track transactions across accounting periods and generate period-specific financial reports.

Related Terms

• Financial Statements
• Bureau of Internal Revenue
• Income Tax Return
• BIR Form 1702
• BIR Form 2550Q
• Expanded Withholding Tax
• Cash Flow Statement
• Trial Balance

References

• PwC Philippines – Tax Administration
• BIR Revenue Regulations – Fiscal Year Requirements
• SEC Memorandum Circular on Fiscal Year Changes
• Accounting Period – Wikipedia