The main difference between fiscal year and calendar year is that a calendar year is a 12-month period that begins on the 1st of January and ends on the 31st of December but a fiscal year does not necessarily begin on the 1st of January and end on the 31st of December.
Both fiscal year and calendar years are 12-month periods. A calendar year is a 12-month period that always begins on the 1st of January and ends on the 31st of December. A fiscal year, on the other hand, is any consecutive 12-month period that ends on the final day of any month. Organizations use fiscal year for financial reporting and budgeting.
Key Areas Covered
1. What is a Fiscal Year
– Definition, Features
2. What is a Calendar Year
– Definition, Features
3. Relationship Between Fiscal Year and Calendar Year
– Outline of Common Features
4. Difference Between Fiscal Year and Calendar Year
– Comparison of Key Differences
Key Terms
Fiscal Year, Calendar Year
What is Fiscal Year
A fiscal year is a one-year period organizations use for financial reporting and budgeting. The organization can be a business, non-profit, or government. We use it for accounting purposes to prepare financial statements. These finances stand for the past year’s costs, revenue and profit margins. Financial reports, external audits, and tax filings are all based on a company’s fiscal year.
Although it is possible for a fiscal year to start on the 1st of January and end on the 31st of December, not all fiscal years correspond with the calendar year. All in all, a fiscal year contains 12 consecutive months and can end on the last month of any month. A fiscal year typically starts at the beginning of a quarter, such as the 1st of January, the 1st of April, the 1st of July, or the 1st of October. For instance, if the year begins on the 1st of April, it will end on the 31st of March next year.
What is a Calendar Year
A calendar year is a 12-month period that begins on the 1st of January and ends on the 31st of December. This year is based on the commonly used Gregorian calendar. It is the international standard used in most parts of the world to organize social, religious, business, personal, and administrative events. We also call this a civil year. A calendar year is divided into months, weeks, and days. Each year has 12 months; each month has 4 weeks while each week has 7 days. There are 12 months, 52 weeks, and 365 days (366 days for a leap year) in total.
Most business organizations use the calendar year for their financial calculations. If such a business refers to its 2019 full-year profits, for example, it is talking about the total money earned between the 1st of January, 2019, and the 31st of December, 2019.
Relationship Between Fiscal Year and Calendar Year
- A fiscal year can start on the 1st of January and end on the 31st of December, just like a calendar year.
- In fact, the calendar year is the most common fiscal year in the world.
Difference Between Fiscal Year and Calendar Year
Definition
A fiscal year is a 12-month period the organizations use for financial reporting and budgeting, while calendar year is a 12-month period that begins on the 1st of January and ends on the 31st of December.
Dates
A fiscal year can begin on any month of the year and ends 365 later while a calendar year begins on the 1st of January and ends on the 31st of December.
Uses
Moreover, a fiscal year is used for accounting purposes to prepare financial statements, while a calendar year is used for normal day-to-day activities, as well as to organize social, religious, business, and administrative events of the year.
Conclusion
A fiscal year is a 12-month period organizations use for financial reporting and budgeting, while calendar year is a 12-month period that begins on the 1st of January and ends on the 31st of December. A fiscal year can begin on any month of the year and ends 365 later while a calendar year begins on the 1st of January and ends on the 31st of December. Thus, this is the difference between fiscal year and calendar year.
Reference:
1. Tuovila, Alicia. “Fiscal Year (FY) Definition.” Investopedia, 28 Aug. 2020, Available here.
Image Courtesy:
1. “Calendar 2016 Calendar Months Free Photo” (CC0) via Needpix
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