Most corporations are required by law or by their own bylaws to report on the results of operations once a year. This one-year accounting period is known as the company's fiscal year. In most cases the fiscal year corresponds with the calendar year, starting on January I and ending on December 31. A business is allowed, however, to establish the dates of its fiscal year as it pleases. A business may choose to make its fiscal year correspond with its natural business year. For example, retailers commonly end their fiscal year on January 31 so as to take into account postholiday sales and returns.
The end of the fiscal year marks the end of an accounting period for the purposes of reporting results to the public and to the company's shareholders. At the end of the fiscal year the company closes its books and balances all of its accounts. It issues an annual report containing, among other items, a balance sheet reflecting the financial condition of the company at the end of its fiscal year. Companies also usually take a physical inventory at the end of their fiscal year.
SEE ALSO : Inventory Accounting
[ David P. Bianco ]