Fiscal Year
Definition Of

Looking to understand the fiscal year definition? First let's start with a brief explanation of the calendar year. The calendar year begins on January first and ends on December 31st.

If you do not select your own fiscal year, you will automatically close your books, file your taxes and plan your budget based on the calendar year ending date. If this applies to you, your calendar year and your fiscal year are one and the same.

However, you can choose to create your own 12-month fiscal year. In this case you would determine the year ending date that is best for your business and you would close your books, file your taxes and plan your budget based on your company's fiscal year ending date instead of the calendar year.

Usually your fiscal year is determined when your business is created. If you are thinking of changing your fiscal year, talk to your certified public accountant who files your taxes about how to do this.

Why would you choose your own fiscal year dates?

1) If it is right for your business.

It might be right for your business to change it's fiscal year. For example, maybe you have a seasonal business and your company's season starts in the fall and ends in the spring. In that case it might make sense for your company to close it's books in spring when the season is finished.

2) If you receive a lot of your funding from investors.

Maybe your company is funded by investors who have a fiscal year that is different than the calendar year. In that case, you might choose the same fiscal year as your investors.

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