What Is an Accounting Period? Fiscal Years, Period Locks, and Closing the Books

An accounting period is the slice of time a set of figures refers to: a month, a quarter, a financial year. Profit is meaningless without one — "we earned 38,000 €" only says something once you add in which period. Periods are also where accounting gets its discipline: every transaction belongs to exactly one period, periods get closed in sequence, and once a period's numbers have been reported, they must stop moving. That last requirement — the lock — is the difference between books you can cite and books you can only describe.

Fiscal years and the periods inside them

The financial (fiscal) year is the reporting unit for statutory accounts and corporate income tax. It usually coincides with the calendar year — in Lithuania that is the default — but companies can operate a different year where law allows, typically to match a seasonal business cycle.

Inside the year, books are kept in monthly periods, because that is the rhythm obligations arrive at: VAT returns and i.SAF registers monthly, payroll declarations monthly, management reporting monthly. The quarter matters where quarterly filings exist (OSS returns, some prepayments), but the month is the working unit of accounting life.

Two rules make periods work:

1. Every transaction is dated into exactly one period — the period the event economically belongs to, not the period someone got around to recording it. This is the cut-off principle, and most period-end effort goes into honoring it (see adjusting entries).
2. Periods close in order. You cannot meaningfully close March while February is still moving — February's closing balances are March's opening ones.

What "closing the books" involves

Closing a month is a checklist, not a ceremony:

1. Capture everything — all invoices in, bank statements imported and matched, payroll posted.
2. Reconcile — ledger bank balance to the bank statement; receivables and payables control accounts to their per-partner detail.
3. Adjust — depreciation, accruals, deferrals, provisions: the adjusting entries that align the ledger with the cut-off principle.
4. Review — run the trial balance, scan for wrong-sided balances and accounts that moved strangely against last month.
5. Report — VAT return and i.SAF from the closed figures, statements as needed.
6. Lock — flip the period so nothing more can post into it.

Year-end close is the same list, harder: plus inventory counts, plus closing entries that roll income and expenses into equity, plus the statutory statements a balance sheet reader will hold you to.

Why locks matter more than they look

The lock is what makes reported figures citable. The moment a VAT return is filed, the period's VAT accounts are quoted in an official document; if an entry lands in that month afterwards — a late supplier invoice backdated to it, a "small fix" — the books silently diverge from the filing. Every subsequent question ("why doesn't the ledger match the return?") is now archaeology.

A locked period converts that silent divergence into an explicit decision. The late invoice posts into the current open period, or — if the difference is material — the closed period is deliberately reopened, corrected, re-reported, and re-locked, leaving a visible trail. Both outcomes are honest; the silent third one is what the lock exists to prevent.

The same logic protects against less innocent edits: period locks plus an append-only general ledger are the two structural guarantees behind an audit trail. One prevents history from being rewritten, the other from being quietly extended.

Periods as an API object

In Nordlet periods are data with a status, not a convention. POST /v1/ledger/periods/list shows each month as open or locked; POST /v1/ledger/periods/lock closes a month and /periods/unlock reopens it, with both actions written to the audit log — who, when, which period. The lock is enforced at posting time: any transaction dated into a locked period is rejected, whether it comes from a manual journal entry, a document flow, or an import. Locking also triggers the period-close run of the revenue recognition engine, so deferred revenue is released up to the period boundary before the month freezes. Closing the books becomes a sequence of API calls with the same guarantees a careful accountant would enforce by hand — minus the relying on everyone remembering.

FAQ

What is an accounting period in simple terms?

The time slice a set of books refers to — usually a month for working purposes and a financial year for statutory reporting. Every transaction is dated into exactly one period, and closed periods are locked against further postings.

Can a financial year differ from the calendar year?

Yes, where national law allows — companies with seasonal cycles often prefer it. The calendar year is the default in Lithuania and most of the EU; changing it is a formal decision, not a bookkeeping setting.

What does it mean to close the books?

To finish a period: capture all transactions, reconcile balances, post period-end adjustments, review the trial balance, produce the filings — then lock the period so the reported figures can no longer drift.

What happens if I post into a closed period?

In a system with enforced locks, the posting is rejected — the entry belongs in the current open period, or the closed period must be explicitly reopened, corrected and re-locked with an audit trail. Systems that allow silent backdating into reported periods let the ledger and the filings diverge unnoticed.

Why are books kept monthly if statements are annual?

Because obligations arrive monthly — VAT, i.SAF, payroll declarations — and because errors are found while they're fresh. A company that only closes annually does twelve months of archaeology every January.