What is Fiscal Year?

What is the fiscal years meaning?

Us is called what is fiscal year see every country has their own fiscal years you know in labor United states-led be India or any other they have their own fiscal years. 

We'll try and evaluate so fiscal year not FY is referred to as the period used for the accounting purpose by the industry at large so it is a period that is lasting closely around 12 months and it is used for budgeting purpose so account keeping in all of the reporting for the industry so fiscal year of a country is set by the the government and there is no universal standard on it so depending upon a country you financially or may get changed and due to this constant changing of accounting period across countries an analyst needs to take into consideration during the preparing the reports no analyzing the financial companies and so on and so forth so generally by law several jurisdictions they demand they demand that the companies prepare and publish its financials on an annual basis but the rule is applicable to the duration of the reporting period and not on the place value so in order to make reporting complete the reports are accompanied by the financial year for which it has been.

Know what is the need for this why there is need for fiscal you see why it is important to have to defined termed for accounting fear for companies that's a  question see one of the reason why they define it required for definite term is required for the financial report is that you know the companies are listed on the country's illustrate Indy there is in the country stock market as well so in today's world of connectivity investors from different countries there are investing in companies listed in different stock markets across globe in different time zones so in order to facilitate streamline flow of information across different stock exchange one has to be cognizant of the accounting periods know what is the difference between the you know fiscal year versus the calendar year see fiscal year versus calendar year so what is the difference between them if you see for financially it's it starts from July for us to June but for calendar it starts from Jan to December so you know this is a very specific accounting term which is a neat neat note with need not necessarily start on January 1st of the year and the fiscal year end on 31st December 31st but this can start at any point there is no such restriction can start at any point is that it no it needs to have a continuous period of 12 months it means to have a period of 12 months to finish one accounting period so across different countries do you financially I may not necessarily mean.

The same Period here and the calendar you however always fiscal year starts on the first day of the new year okay that is in the month of January across country is the calendar year refers to the same period okay oh the consecutive 12 months starting from January 1st and ending it December 31st so some companies rather decide to choose their financially that consists of only full weeks you know that's fiscal year and fiscally end there on a particular day of the week so in such case the length you know if you see the the length of the financial year is not the exact thing or the no it's it's not exactly 12 months insert you know some fiscal years are like you know 52 weeks and while some are 53 weeks long and so on and so forth let's discuss some of the advantages so you know one f the main deciding factors for companies while making the choices of the financial year is their business cycle now some industry see a parallel in their business cycle with a calendar you as it fits them better but in such case the Optus calendar year as the reporting period instead of financially and for other industries a better choice could be to follow financially as their accounting period as the  companies find it counterproductive to follow calendar you for reporting that comes with the adjustment for the mismatch in the accounting period and the business cycles schools and colleges for instance you know they prefer to choose financial year stating in the month of June as their accounting period and the reasons for forth for this is that you know the time period color coincides with the intake of the new batches of students basically now let's take an example here let's say the retail industry in general see a surge in the business in December and January holiday seasons now if the retailer chooses calendar year then what so let's assume that for argument's sake you know that 2015 holiday season December 2015 and Jan 2016.

Was exceptionally for the retailer and 2016 holiday season was very poor o when comparing the two seasons the following will happen first the high-performing months of December 15 now they will get included in the in 2015 year-end result only now however one high-performing month of December 16 is included in 2016 results okay when we compare 2015 results with our own 2016 we know that you know the comparison is not at all fruitful at all as the full effect of seasonality is yeah captured so if if the retailer followed the fiscal year the retail choosey you financially different from the calendar year let's say the the retail company is the Beaufort 1st of April choose a 1st of April to 31st of March then you know financial year 2016 will include the high-performing months like great December 15 and Jan 2016 and financial year 2017 will include under under performing months like December 16 and Jan 17 so this time when we compare financial year 2016 with out of 2017.

We can effectively contrast the excellent season with that of the poor season they were effectively capturing the seasonality now which are the commonly used commonly used fiscal year which are them the first one is from 1st of Jan to 31st of December then you have 1st of April to 31st of March that's one of them you have 1st of July to 30th of June and then you have 1st of October to 30th of October the 30th of September of fiscal years usually you know denoted by the year in which it ends so if a business follows the April to watch financial cycle then the financial year will be 2017 and for the period from 1st of April 2016 to 31st of March 2017 so on the concluding note in the above tutorial we looked at why there is a need to having a definite term financially and understood its meaning for the curious ones there are multiple sources on web highlighting the advantage of choosing a particular period as it's financially over and in generally the decision of choosing the financially or for a company is very specific to the business cycle so the reporting deadlines of the country in which it operates and demographics.

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