Texas Legal Entities
Fiscal Years
A fiscal year is a period used for calculating annual, or yearly, financial statements in businesses and other organizations. In many states, there are regulatory laws concerning accounting and taxation that require these reports once every twelve months. The laws typically do not require that the period reported on constitutes a calendar year, January to December. Fiscal years vary between businesses and countries.
In many cases, the fiscal or tax year is specifically designed not to match the calendar year, or natural year. This is done so that accounting year-end work does not coincide with periods of high activity. This includes the Christmas shopping rush for retailers. It is also designed not to coincide with holiday periods when employees may prefer to take vacations.
If the fiscal year does not coincide with the calendar year, then the calendar year in which the fiscal year ends is used in the shorthand. For example, July 1 2008 to June 30 2009 would be marked as FY09.
Retailers use a non-calendar year fiscal accounting system. This is because at the end of December, levels of inventory, receivables, and payables will be higher than at other month ends and consequently more complex and time-consuming to measure accurately. As a result, retailers commonly use a month other than December to end their fiscal year. January is commonly chosen as the last month of their “year” because activity levels are likely to be much closer to normal by the end of January.
Many companies find that it is much easier for comparison and for accurate stock taking always to end their fiscal year on the same day of the week, where local legislation permits. Some fiscal years have 52 weeks and others will have 53 weeks.
Contact a Business Foundation Expert
For more information on all of the information concerning starting a business, contact the business foundation experts of
Texas Legal Entities.
At any time, please feel free to ask us a question. It's FREE!