Understanding the Fiscal Year
The fiscal year is a 12-month period used by businesses and governments for accounting and financial reporting purposes. In Singapore, the fiscal year is commonly referred to as the financial year.
For most businesses, the fiscal year runs from January 1st to December 31st. However, some businesses may choose to use a different period based on their business needs. For instance, a company that is seasonal may choose to have their fiscal year run from July 1st to June 30th to align with their peak business periods.
The fiscal year is used to prepare financial statements, such as balance sheets, income statements, and cash flow statements. These statements are prepared at the end of the fiscal year to provide stakeholders with an overview of the company's financial health and performance.
Businesses must file their financial statements with the relevant government agencies, such as the Inland Revenue Authority of Singapore (IRAS) and the Accounting and Corporate Regulatory Authority (ACRA). Failure to file financial statements may result in fines and penalties.
It is important for businesses to plan their finances and accounting procedures around their fiscal year. This includes setting budgets and financial goals for the upcoming year, as well as preparing for tax filing and audits.
Some common fiscal year-end tasks include:
1. Closing the books: This involves reconciling all accounts and preparing financial statements for the year-end.
2. Preparing for audits: Businesses may need to prepare documentation and schedules for external auditors to review.
3. Filing taxes: Businesses must file their tax returns with the relevant government agencies, such as the IRAS, by the deadline.
4. Setting budgets and financial goals: Businesses should review their financial performance for the year and set goals and budgets for the upcoming year.
In conclusion, the fiscal year is an important concept in accounting and financial reporting. It is used to prepare financial statements and is the basis for tax filing and audits. Businesses must plan their finances and accounting procedures around their fiscal year to ensure compliance and financial health.