Difference Between Similar Terms and Objects

Difference Between Fiscal Year and Calendar Year

The terms fiscal year and calendar year are frequently used in many aspects of life. While the fiscal year is more common in businesses, the calendar year is used generally. The knowledge of differences between fiscal and calendar years is essential as failure to do so may result in accounting mistakes. While the two last for 365 days, they can begin on completely different timelines. The calendar year can also be used as the fiscal year.

 

What is Fiscal Year?

This is a 12 month period whereby businesses choose the preferred start and end of the period. This helps in the establishment of consistent accounting practices and easy tax reporting. Before setting the fiscal period, companies may consider financial reporting deadlines, tax season or even business statistics.

 

What is Calendar Year?

This is a set period of 12 consecutive months that follow the structure of the standard calendar that begins on January 1 and ends on December 31.

 

Similarities between Fiscal Year and Calendar Year

  • Both have 365 days

 

Differences between Fiscal Year and Calendar Year

Definition of Fiscal Year vs. Calendar Year

While the fiscal year is a 12 month period whereby businesses choose the preferred start and end of the period, the calendar year is a set period of 12 consecutive months that follow the structure of the standard calendar that begins on January 1 and ends on December 31.

Common Use

The fiscal year is useful in businesses in the establishment of consistent accounting practices and easy tax reporting. On the other hand, the calendar year is useful in normal life activities.

Year Period

While the fiscal year can run from any time in the year provided it has 365 days, the calendar year runs from 1st January to 31st December. 

Fiscal Year vs. Calendar Year: Comparison Table

 

Summary of Fiscal Year vs. Calendar Year

While fiscal year is the most commonly used for business reporting, calendar year may also be used as it is a simple way for businesses to handle their accounting and financial affairs. It is, however, not recommended as it may be misleading and may not give accurate results. For business reporting, therefore, fiscal year is the best suited. The knowledge on these terms is hence important as it helps one make sound accounting and financial decisions.

 

Tabitha Njogu

Tabitha graduated from Jomo Kenyatta University of Agriculture and Technology with a Bachelor’s Degree in Commerce, whereby she specialized in Finance. She has had the pleasure of working with various organizations and garnered expertise in business management, business administration, accounting, finance operations, and digital marketing.

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References :


[0]World Health Organization, World Bank, United States. Agency for International Development. Guide Pour L'élaboration Des Comptes Nationaux de la Santé- Academic Search Complete Nonserial Publication. World Health Organization, 2003. https://books.google.co.ke/books?id=k6DxnrZF2ZAC&pg=PP300&dq=Difference+between+fiscal+year+and+calendar+year&hl=en&sa=X&ved=0ahUKEwi2psWktZHhAhUt8-AKHeJQCTY4FBDoAQhVMAk#v=onepage&q=Difference%20between%20fiscal%20year%20and%20calendar%20year&f=false

[1]Choi Fredrick. International Finance and Accounting Handbook. John Wiley & Sons Publishers, 2003. https://books.google.co.ke/books?id=5z2pGMGE8mYC&printsec=frontcover&dq=finance+and+accounting+calendars&hl=en&sa=X&ved=0ahUKEwjSjc66tpHhAhXgA2MBHWQ5AAsQ6AEILDAB#v=onepage&q=finance%20and%20accounting%20calendars&f=false

[2]Lebas M & Stolowy H. Financial Accounting and Reporting: A Global Perspective. Cengage Learning EMEA, 2006. https://books.google.co.ke/books?id=rRGF7iSaxc8C&printsec=frontcover&dq=Difference+between+fiscal+year+and+calendar+year&hl=en&sa=X&ved=0ahUKEwiTvfCKtZHhAhU9DmMBHUcSCMMQ6AEILDAB#v=onepage&q&f=false

[3]Image credit: https://www.publicdomainpictures.net/en/view-image.php?image=257635&picture=2019-calendar-template

[4]Image credit: https://img.wcido.com/large/sap/versionisnotdefinedforfiscalyear/versionisnotdefinedforfiscalyear6.png

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