The importance of closing accounts for a determined period derives from understanding the importance of financial reporting in the first place. Financial reporting is for having accurate accounts about a company and it’s performance. Without those the business could possibly go into bankruptcy since it’s not in compliance with regulations (i.e. not paying taxes in due time, in required amounts), it would be unable to meet it’s creditors demands due to insufficient cash flows and liquidity problems (since the accounts didn’t reflect accurate demand of raw material for an example and the company kept purchasing more when it didn’t need this much goods). These effects in turns impact people, they would lose their jobs and so on. 

Therefore it is important to understand where the company is, it’s financial position and how it’s performing, it’s income statement.

The way to do that, at least one measure for achieving this, is ensuring that the company’s accounts are kept day-to-day by certain accounting routines and that the periods the company is measured by, are prepared (i.e. ‘closed’) using exhaustive and routine procedures. By word ‘exhaustive’ I mean that the procedures carried through are in fact relevant and none are excluded merely due to lack of time or unwillingness to carry them through. Just the same the routines should be written down and understandable for everyone participating in closing the accounts and in the accounting in general. Remember, it’s not just about the closing of the period but ensuring that certain routines are followed thoughout the period – only then it can be assured that the closing itself goes smoothly.