What is accounting year?
The accounting year is the period of time that a company uses for the purpose of preparing its financial statements and calculating its financial performance. This period is typically a calendar year, but it can also be a fiscal year that is different from the calendar year.
An accounting year is the time period in which a company collects and organizes its financial activity. The company can choose a fiscal year as an accounting year or a calendar year.
The common calendar year runs from January 1 to December 31, and quarterly accounting periods for financial statements run from January 1 to March 31, April 1 to June 30, July 1 to September 30, and October 1 to December 31. In addition, some businesses generate financial statements for internal use on a monthly accounting period basis.
In accounting terms, a calendar year indicates that an entity begins aggregating accounting records on the first of January and ends data accumulation on the last day of December. This annual accounting period is modelled after a standard 12-month calendar period.
Accounting periods are useful to analysts and potential shareholders because they enable them to identify trends in a single company’s performance over time. Accounting periods can also be used to compare the performance of two or more companies over the same time period.
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