Accounting year is a period in which the company calculates, organizes, and releases its financial statements. Shareholders and investors analyze financial performance by comparing income statements within this specific period.
The period of an accounting year is usually 12 months, but when it starts depends on the business. These are the two types of accounting years:
- Calendar year: A calendar year starts on the first day of January and stops collecting data on the last day of December.
- Fiscal year: A fiscal year begins on any arbitrary date set by the company and ends after one year of the starting date. The financial data is collected during this period.
Commonly used fiscal years are:
- February 1st - January 31st: Used by retail stores.
- October 1st - September 30th: Used by the US federal government.
- June 1st - May 31st: Used by non-profit organizations.
The accounting period is three months for Public sector companies, as they need to submit their reports to the Security and Exchanges Commission four times a year.