Meaning of 4 4 5 Calendar
Generally, business accounting period is one year which starts from 1st Jan. to 31st DEC. or 1st April of current year to 31st march of next year. We compare our this year financial statement with previous year. But if you want to compare your accounting data more deeply, you can convert your annual accounting period in to 4 4 5 calendar period. Now, know what is this.
We convert whole one year accounting periods into 4 quarters. Each quarter will come 3 months. We again divide each quarter in to week. There will be 13 week in each quarter which will classified in to 4 weeks + 4 weeks + 5 weeks. But is not necessary to take the period like this, you can also take 4 weeks + 5 weeks +4 weeks or 5 weeks + 4 weeks + 4 weeks.
Benefits of 4 4 5 Calendar
1. Company can make financial planning through weekly budget.
2. Company can compare its production and sales performance on weekly basis.
3. Deferred and Accrual accounting can be easily utilized in 445 calendar.
Challenges for convert 4 4 5 calendar period
Laresa McIntyre has solved following challenges in his blog :
Related : Effect of Changing Accounting Period
Reference for Further Reading
https://en.wikipedia.org/wiki/4%E2%80%934%E2%80%935_calendar
Download Financial Accounting eBook
https://www.krantikari.org/2016/09/financial-accounting-ebook.html
Generally, business accounting period is one year which starts from 1st Jan. to 31st DEC. or 1st April of current year to 31st march of next year. We compare our this year financial statement with previous year. But if you want to compare your accounting data more deeply, you can convert your annual accounting period in to 4 4 5 calendar period. Now, know what is this.
We convert whole one year accounting periods into 4 quarters. Each quarter will come 3 months. We again divide each quarter in to week. There will be 13 week in each quarter which will classified in to 4 weeks + 4 weeks + 5 weeks. But is not necessary to take the period like this, you can also take 4 weeks + 5 weeks +4 weeks or 5 weeks + 4 weeks + 4 weeks.
Benefits of 4 4 5 Calendar
1. Company can make financial planning through weekly budget.
2. Company can compare its production and sales performance on weekly basis.
3. Deferred and Accrual accounting can be easily utilized in 445 calendar.
Challenges for convert 4 4 5 calendar period
Laresa McIntyre has solved following challenges in his blog :
- Bank statements are usually done on a monthly basis but this can usually be overcome by asking your bank to cut off your statement dates according to your schedule. And honestly, who isn’t using electronic downloads from their bank account anyway to do bank reconciliations? This objection to the 4-week reporting cycle is not a show stopper.
- Some expenses are billed on a monthly basis. Handling this one does require a little bit of work on the part of the accounting staff but when you consider the potential benefits in reporting, it might be worthwhile. Let’s take rent, for example. Let’s say your rent for the year is $120,000. When you receive your monthly bill for $10,000, code it to a prepaid account and expense $9,230.77 per period (1/13th of the yearly total). By the end of the year, the entire amount will have been expensed equally amongst the periods and the prepaid account balance will be zero.
- I know that some software packages like QuickBooks have their canned reports built on a monthly reporting schedule. In QuickBooks, this is easily taken care of by creating memorized reports with the appropriate date ranges corresponding to the period. There is probably a workaround in most systems if they don’t accommodate the 4-week reporting cycle.
Related : Effect of Changing Accounting Period
Reference for Further Reading
https://en.wikipedia.org/wiki/4%E2%80%934%E2%80%935_calendar
Download Financial Accounting eBook
https://www.krantikari.org/2016/09/financial-accounting-ebook.html
What would be a good practice approach for AP invoices that are billed on a monthly calendar but need to be entered into a retail calendar? For example, if a vendor invoices $10k that covers 5/1-5/31, what would be good practice? Use the retail month end date for period 5 or prorate the invoice into the correct retail period (e.g. could be 4 weeks in period 5 and a few days in period 6)?
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