What is Fiscal Year in the USA?
A Fiscal year is an accounting or financial year which is customized for all the financial transactions and accounting procedures and is a period of 12 consecutive months which is reckoned for taxation purposes. The fiscal year in the USA for the federal government starts from Oct 1st to Sep 30th of the next calendar year.
Importance of Fiscal Year
- When a company starts a fiscal year, Firstly, they initiate the fundamental analysis and budget forecasting.
- Financial reports are based on transactions related to the fiscal year of the company and generated at the end of the fiscal year.
- Taxation and audit will be done after the fiscal year ending as per the due date.
Fiscal Year Starting Dates and its Origin in the USA
Generally, the fiscal year in the USA starts from Oct 1st to SEP 30th of the next calendar year or 365 days.
Here a crucial point related to the US Fiscal year, i.e., Prior to 1976, the fiscal year started from July 1 and ended on Jun 30 of the next calendar year. The Congressional Budget and Impoundment Control Act provided the change what is known as the transitional quarter from 1st 1976 and 30th Sep 1976.
The first fiscal year of the US in Jan 1st, 1789. Then the beginning date Jan 1st had been changed to JUL 1st in 1842. And finally from Jul 1st to Oct 1st where it is today.
When a fiscal year starts in the USA:
Oct 1st of every calendar year;
When the fiscal year ends in the USA:
The fiscal year ends on Sep 30 of the next calendar year.
Every US set budget and this budget is the collection documents that contain the message of the president and the budget proposals for a proposed fiscal year.
Here we have some details related to the US previous fiscal years.
- FY 2020 is started from Oct 1st, 2019 to Sep 30th, 2020
- FY 2019 is started from Oct 1st, 2018 to Sep 30th, 2019
- FY 2018 is started from Oct 1st, 2017 to Sep 30th, 2018
Generally, the fiscal year for the companies also the same. But some business chooses different dates for tax purposes. Business having seasonal profits also takes some other date for the adjustments of the revenue. A Company can choose its financial year as a fiscal year or calendar year based on their requirement and revenue cycleRevenue CycleThe revenue cycle defines and maintains the processes for completing an accounting process for recording revenue generated from services or products, which includes the accounting process of tracking and recording transactions from the beginning to end delivery of an order.. Annual financial reports and tax payments will be made based on the company’s fiscal year. Companies take this fiscal year based on their accounting and auditing requirements also.
Generally, non-profitable organizations will have different dates because they start on the receiver of their grants and rewards. In the US, any company can adopt their financial year as fiscal year by submitting their income tax return with dates mentioned as per fiscal year. If they want to change to the calendar year, they have to seek legal permission and follow the procedures related to it.
Maybe the beginning date of the fiscal year the company is different from the fiscal year, many companies’ reports quarterly if companies opt for the calendar year as their business. At the end of the fiscal year, the financial statementsFinancial StatementsFinancial statements are written reports prepared by a company's management to present the company's financial affairs over a given period (quarter, six monthly or yearly). These statements, which include the Balance Sheet, Income Statement, Cash Flows, and Shareholders Equity Statement, must be prepared in accordance with prescribed and standardized accounting standards to ensure uniformity in reporting at all levels. related to the business should be finalized and reported.
Most of the companies, except C corporationsC CorporationsAccording to US tax laws, any corporation that is not a S corporation is considered a C corporation, which has a different legal status and is taxed accordingly. It has its own articles of incorporation that defines its activities and is held by the shareholders, while its liability is limited., which have complex accounting policiesAccounting PoliciesAccounting policies refer to the framework or procedure followed by the management for bookkeeping and preparation of the financial statements. It involves accounting methods and practices determined at the corporate level., use the calendar year as their fiscal year.
Companies use a fiscal year to track revenue and costs. The duration of the fiscal and the financial year are the same i.e., consecutive 12 months. However, dates may coincide or different. Companies use fiscal years to match the revenue cycles of the government.
This has been a guide to what is the fiscal year in the USA. Here we discuss the starting date, ending date, and the origin of the fiscal year along with examples. You can learn more about financing from the following articles –