A 12-month period used for accounting, budgeting, and tax purposes—the timeframe for measuring annual financial performance.
A financial year (also called an accounting year) is the 12-month period your business uses to track financial performance, prepare statements, and file taxes. It defines the boundaries for this year's revenue, expenses, and profits.
For most small businesses in the US, the financial year is the calendar year—January 1 through December 31. However, businesses can choose a different 12-month period that better fits their operations.
While many businesses use the calendar year, some choose different periods:
Your financial year determines when you recognize income and expenses for tax purposes, when tax returns are due, and the periods covered by your financial statements. Once you choose a financial year, you generally need to stick with it unless you get IRS approval to change.
