difference between fiscal year and calendar year

The fiscal year and the calendar year are two distinct ways of measuring time, each with its own purpose and characteristics:

Fiscal Year

  • Definition: The fiscal year (FY) is a financial accounting period used by businesses, governments, and organizations to track their financial activities.
  • Duration: It typically spans 12 months, but the starting and ending dates can vary.
  • Start and End Dates: The fiscal year does not necessarily align with the calendar year. It often begins on a date other than January 1st.
  • Purpose: It is primarily used for financial reporting, budgeting, and tax purposes.
  • Examples:
    • In Nepal, the fiscal year starts around mid-July and ends around mid-July of the following year.
    • In the United States, the federal government’s fiscal year runs from October 1st to September 30th.

Calendar Year

  • Definition: The calendar year is the standard 12-month period that follows the natural progression of months.
  • Duration: It spans from January 1st to December 31st.
  • Start and End Dates: It aligns with the months of the year.
  • Purpose: It serves as a common reference for daily life, historical events, and personal planning.
  • Examples:
    • New Year’s Eve celebrations occur on December 31st, marking the transition from one calendar year to the next.
    • Income tax returns in many countries are based on the calendar year.

In summary, the fiscal year focuses on financial matters, while the calendar year is a broader measure of time used in everyday life. Both systems have their own significance and applications.