Have you ever been confused when people are talking about fiscal year and calendar year reporting? If so, then you’re not alone! Even though they may seem similar on the surface, there is actually a key distinction between these two ways of tracking time. In this post we will explain what fiscal and calendar years mean as well as provide examples that will help clarify the differences so you can understand financial data more easily.
What is a Fiscal Year?
The fiscal Year (FY) is the year used by companies and government entities in tracking their financial performance. The fiscal Year is a 12-month period used for compiling accounts, filing taxes, and budgeting. Fiscal years can start on any month, depending on what works best with the company or organization’s internal fiscal cycle.
It is important to have a Fiscal Year because it allows an organization to keep track of its expenses, investments, income, and profits over the past year so they can be properly reported to shareholders and other stakeholders. The fiscal year plays an important role in keeping track of finances as well as helping with planning strategically for the future.
What is Calendar Year?
A Calendar Year is the twelve-month period of time used for general purposes such as calculating taxes and payments or for celebrating events. Calendar Years are calculated by assigning each month a numerical value; traditionally, this system counted from January to December with the corresponding numbers from one to twelve.
This system provides a cohesive structure and context for planning and tracking events, goals, and activities long-term. A Calendar Year allows us to look ahead at yearly plans while also looking back on past achievements so that we can continually strive toward progress and success.
Difference between Fiscal Year and Calendar Year
Fiscal Years and Calendar Years are two commonly used terms when discussing budgets, taxes, and more, but they can be easy to confuse.
- Fiscal years are periods of time lasting typically 12 months that start on a date decided by whoever is monitoring the fiscal year in question; usually, this period will not correspond with the calendar month.
- In contrast, Calendar Years start on January 1st and end at December 31st of each year; This year-long period is usually used for government or organizational budgeting and renewals.
- Fiscal versus Calendar Year can be important when talking about filing taxes or other major financial decisions. Thus it is essential to differentiate and understand the terms Fiscal Year and Calendar Year when being utilized in any context.
A fiscal year is a 12-month period that companies use for accounting purposes. It can be any 12-month period, but it’s usually the same as the calendar year. The main difference between a fiscal year and a calendar year is that a fiscal year doesn’t necessarily have to start on January 1st and end on December 31st. A company’s fiscal year may start on July 1st and end on June 30th, for example. This just means that their “year” isn’t aligned with the rest of the world’s years. If you’re ever unsure about which timeframe a company is using when they talk about their financials, just ask! And now you know the difference between these two important timeframes.