“Financial Year”

Overview of Financial Year

Financial year(FY) is a period of 12 consecutive months, during which an organization or business keeps track of Taxable Income, expenses, assets, liabilities, and profits. It is important that the organization or business defines a specific start and end date for their financial year for reporting and budgeting purposes. The financial year acts as a basis for the company to measure its performance and make strategies.

Defining the Financial Year

A financial year refers to a period of twelve months during which an organization or business sets out to measure income, expenses, assets, liabilities, and profits for the purpose of budgeting and reporting. Generally, businesses choose to align their financial year with the calendar year, meaning it ends on December 31. That said, organizations and businesses are allowed to choose any given twelve consecutive months during the calendar year as their financial year, depending on their needs and preferences.

Importance of the Financial Year

The financial year allows businesses and organizations to measure their performance over predetermined timeframes. This information provides valuable insights into financial progress and outcomes and helps identify areas of improvement or opportunities for growth. Additionally, the financial year is a necessary metric for reporting compliance and tax filing. Having a defined financial year allows businesses to better manage their finances and achieve their objectives.

FAQs

What is the financial year 2023?

The financial year 2023 will run from 1st January to 31st December 2023.

Can organizations choose any dates for their financial year?

Yes, organizations and businesses are allowed to choose any given twelve consecutive months during the calendar year as their financial year, depending on their needs and preferences.

Are financial years the same worldwide?

No, different countries have different standards for their financial year. Some countries, such as the U.S., adopt the calendar year while others prefer a different standard altogether.

Also, See: Financial Incentives