Did you know that there’s two different years we use in the business world? One’s called the calendar year, and the other one’s called the financial year.
Let’s say you’re an accountant. When the year ends, everyone’s trying to do their paperwork.
Everyone’s figuring out their profits for the year, doing their taxes, figuring out stock… the business world is busy finishing all the business books for the year.
If you’re an accountant, or anyone in the business world, some of the busiest times for you are at the end of the year. There’s so much to do. But what are you normally doing at the end of the year?
You’re on holiday. What bad timing!
So, we change it up a bit.
For business, the year ends in June, exactly 6-months after the holiday period, and totally on the other end of the calendar. The government and tax office choose this date to begin the default financial year for taxes and businesses. It means that the end of year paperwork can be done during the middle of the year, when no one’s on holidays and all the staff are available to work.
Different countries have different financial years, and even some businesses can choose their financial year to suit their business. Though it might be a little confusing at first, the financial year was an invention to make the business world run smoother.
But what does this mean for you, the average person?
You work in the business world and you do your taxes. All your tax paperwork is due according to the financial year. The financial year ends at the end of June, on June 30th, and the year begins the next day on July 1st, so it’s still exactly 12 months like a normal year. From July 1st to October 31st is your 4-month window for your tax returns to be completed. After that date, your return is overdue.
So, if half of this financial year belongs to one calendar year, and the other half belongs to another calendar year, how do we identify the financial years? What do we call them?
There are two ways to identify them.
One, we can call it by the year it ends. The financial year half in 2015 and half in 2016 would be called the year ending 2016.
The other option is to simply call it the financial year 15/16, with a slash dividing the years.
Not too complex, right?