Generally, a year denotes 12 months, where there are about 365 days and 366 days if it is a leap year. We often hear about the terms fiscal year and calendar year, but many of us don’t even know what it represents snd the differences between them. Both the years, consist of 365 days but the starting and ending period differs.
Fiscal Year vs Calendar Year
The main difference between Fiscal Year and Calendar Year is its usage. It has come to notice that fiscal year is often used term by business enterprises. It helps to keep an exact count or record of the work accomplished by the company. On the other hand, in simple words, the calendar year refers to the normal year where the date starts from 1st January to 31st December.
A fiscal year where we can choose any starting and ending date, but it should have 365 days in total. The fiscal year is usually used by the business. Generally, it helps to keep a record of the respective company’s profits, loss, taxation, etc.
On the other hand, the general year where we count the start from 1st January to the end 31st December is known to be a Calendar Year. Generally, all the holidays are based on the Calendar Year.
Comparison Table Between Fiscal Year and Calendar Year
|Parameters Of Comparison||Fiscal Year||Calendar Year|
|Usage||A fiscal year is used for business purposes to keep financial records.||In our daily life, we use the Calendar Year.|
|Tax Reporting||It is comparatively complicated for tax reporting during a fiscal year.||In a calendar year, it is easy and simple for tax reporting.|
|Income and Expense History||A fiscal year holds income and expense history together.||Income and expenses are divided into two individual parts in a Calendar year.|
|Relations Between Two Companies||When two companies have different fiscal years, it becomes difficult to any comparison between them.||It is simple and easy to calculate the differences between two companies during a calendar year.|
|Period||Generally, the fiscal year does not have an accurate starting and ending period.||There are exactly 12 months time period for Calendar Year.|
What is a Fiscal Year?
A year in general presents 12 months and a fiscal year is also a year where there are about 12 months and with a total of 365 days, but a fiscal year is a term that is often used by the people who are associated with business enterprises or government franchises as well. A fiscal year is a period generally used for keeping records for the financing accounts for various organizations. When a period is accounted as a fiscal year, it becomes easy and simple to keep records, especially for the financial section.
A fiscal year can start from any date or any month of the calendar, the only obligation is that it should consist of 365 days in total, not more or less than that. A fiscal year makes the tax reporting process a bit complex and hence people generally do not consider it. One major benefit of the fiscal year is that it together accounts for the income and expense history.
The fiscal year helps people in several ways such as it avoids tax burdens, it also helps to choose any date or month for profits, etc. A few examples for usage of a fiscal year are- India’s fiscal year accounts from 1st April to 31st December, the fiscal year for U.S federal- 1st October to 31 September.
What is a Calendar Year?
The Calendar years refers to the period that starts from 1st January and ends on 31st December yearly. The yearbook that we follow in general is called a Calendar Year. A calendar year consists of 365 days or 366 days (When it is a leap year). And we are bound to follow the calendar year from 1st January to 31st January, and hence we can not change it as it is followed by everyone all over the world. We can not decide the Calender year on our own as it is internationally recognized.
It has been noticed that a calendar year makes tax reporting easy and simple to follow. Also, the holidays, birthdays, anniversaries, death anniversaries are accounted as per the Calender year. It not only helps in such tasks but is associated with other benefits like it is easy to follow, widespread usage, etc. And during a calendar year, the income and expenses are separated and then they are calculated.
The calendar year also helps to calculate or make comparisons between two company’s finances. This is because, the differences are easy and clear during a calendar year, even though they might have variant fiscal years.
Main Differences Between Fiscal Year and Calendar Year
- The business enterprises mainly use the fiscal year and on the other hand, the main yearly record which is used daily is the calendar year.
- The tax reporting services become a bit complicated in a fiscal year while on the other hand, the calendar year helps to keep the tax reporting easy.
- The income and expense are combined in a fiscal year while on the other hand, the calendar year separates the income and expense history.
- It is quite difficult to differentiate between two companies, in terms of their respective fiscal year while on the other hand, the calendar year enables us to compare to companies.
- A fiscal can be started from any date of the year while on the other hand, there is an accurate date selected for the calendar year to start.
A year is supposed to give us a period where there are about 12 months in it. We can also say that the earth takes about 12 months or 365 days to revolve the earth and therefore, a year has been estimated based on this theory. But, now certain terms have emerged to calculate and have some specific knowledge about something. Fiscal year and Calendar year are two different terms and therefore we have differentiated between them. Their usage, emergence, benefits, etc. Each year has 12 months but their usages are different from each other.