Accounting year - What is an accounting year?
An accounting year is the period of time over which a company gathers and organises its financial activity
Beginning or ending an accounting period? Have all of your financial reports at your fingertips with an efficient accounting system such as Debitoor.
The information gathered during an accounting period (also called the accounting year because it is determined by a company's fiscal year) is used to create both internal and external annual reports that are published at the close of the accounting period.
The end of the year report typically includes:
An income statement: also known as the ‘profit and loss statement’, this document seems fairly self-explanatory. It shows a full record of all financial transactions over a specific period of time. It includes sales, expenses, gains and losses that the company experiences in that time. This document provides an indication of the financial standing of the company and outlines its progress.
A statement outlining any changes in the financial position of the company: also known as the ‘statement of cash flows’. This document provides details about the flow of cash (this includes credit) both into and out of the company. It is useful in determining which activities generate cash, and where cash is being spent.
A statement detailing the company's retained earnings: the ‘retained earnings statement’. Usually accompanies the income and profit & loss statements, as well as the balance sheet, it presents any changes in the total profit of the company.
These reports are used for a number of purposes including; taxation, investment potential, as well as internal evaluation.
Beginning and ending an accounting year
It is important for a company to clearly define their accounting year from the start and remain consistent in beginning and ending the fiscal period on time.
In the UK, the accounting year is typically a 12-month period that follows the calendar year, beginning on January 1st and ending on December 31st.
However, this is not obligatory and many businesses choose to end their year on March 31st and begin a new fiscal year on April 1st. An 18-month accounting period is also not uncommon.
From start to close
An accounting period starts when: a) a company begins to trade or b) immediately after the end of a previous accounting period.
An accounting period ends at the earliest of the following:
- Twelve months after the start date
- At the end of the company's previous accounting period
- At the start of a ‘winding up’
- On ceasing to be a resident of the UK
An accounting year with Debitoor
With a Debitoor account, you can adjust your accounting year by simply selecting the dates on which you would like your company’s financial year to begin and end. The profit & loss statement, balance sheet, and a report on the VAT generated by sales and expenses are available immediately and are easy to share with your accountant or print off for your own records.