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Strictly speaking, the result of the business can be estimated at the end of its life. If a firm was started with a capital of Rs. 50,000 and at the end of its life the capital was Rs. 5,00,000 we can say that the fi1m earned a profit ofRs. 4,50,000 i.e., 5,00,000- 50,000 during its life. In this way, business as a going entity will continue indefinitely and we will have to wait for a very long period to estimate the financial result of the business. It will be too late to wait for the results, so the life span of accounting should be split into shorter and convenient period. At present, accounting periods are regarded as twelve months. Accordi!lg to the Companies Act and Banking Regulation Act, accounting period should consist of twelve months. The period of twelve months is regarded as ideal and convenient period for accounting.