Accounting periods are generally classified into two. They are:
- Calendar year; and
- Fiscal year
Calendar Year — is an accounting period which starts from January 1 and ends on December 31. This is used by most taxpayers who elect the calendar year as their accounting period. However, the calendar year shall be the basis of computing the net income in the following cases:
- when the taxpayer is an individual;
- when the taxpayer does not keep books of accounts; and
- when the taxpayer has no annual accounting
Fiscal year — is an accounting period of twelve months ending on the last day of any month other than December 31.
Corporations and duly registered general co-partnerships are allowed to use this type of accounting period.
A taxpayer may have a taxable period of less than twelve (12) months in the following cases:
- when a corporation is newly organized and commenced operations on any day within the year;
- when a corporation changes its accounting period;
- when a corporation is dissolved;
- when the Commissioner of Internal Revenue, by authority, terminates the taxable period of a taxpayer pursuant to Section 6 (D) of the Tax Code; and
- in case of final return of the decedent and such period ends at the time of his death.
Reference: RAMO 1-2000