Fiscal Year / Financial Year

What is a Financial Year?

Financial year is also known as the Fiscal year and often abbreviated as F.Y. It represents the 12 consecutive months of the year that an organization uses for business, accounting, Budgeting, and financial purposes. Unlike the Calendar year or assessment year, the financial year is different, and it can be unique for every country according to its needs.

It promotes flexibility in financial reporting and planning. These fiscal years are known to align better with the organizations or businesses and are used for making tax strategies. The financial year in India starts on April 1st of one year and ends on March 31st of another year.

Purpose of Fiscal Year

The organisations adopt the concept of a fiscal year for various strategic purposes and maintain the financial accounts. There are many objectives and uses of the fiscal year. One of the primary objectives of the financial year is to provide a more correct picture of an organization's financial conditions and its performance by maintaining its reporting periods with natural business cycles.

The fiscal year in India for educational institutions can be different from that of the organisations, as it usually runs from July 1 to June 30. It is aligned with the academic calendar and timing of the students' payments. The non-profit organisations align their fiscal years with the timings of grant awards and major fundraising events.

Advantages of the Fiscal Year

There are many advantages of the financial year, such as:

• Fiscal years are used for making the financial reports and are also known as the budget year.
• It is also used in making the annual tax calculations.
• It aligns with the natural business cycles.
• Financial years can be any consecutive 12 months.
• It reduces the burden of end-of-year accounting.
• It facilitates more accurate comparisons year-over-year.