Glossary · Bookkeeping basics
Fiscal year (FY)
A fiscal year is the 12-month period a business uses for its accounts and, usually, its tax return. It can match the calendar year, January to December, or end in another month, such as June 30 or September 30. Year-to-date reports, budgets and the year-end close all follow the fiscal year.
Glossary / Fiscal year · Also called financial year, tax year
How it works
Many small businesses use the calendar year because it is simple and matches personal tax. Seasonal businesses sometimes pick a year-end after their busy season, when inventory is low and there is time to count it.
Changing a fiscal year usually needs tax authority approval or follows set rules, so it is chosen at the start. Payroll does not follow the fiscal year: payroll years run January to December in both the US and Canada, whatever the business's year-end.
Worked example: A fiscal year ending June 30
A ski rental shop picks a fiscal year from July 1 to June 30. Its fiscal 2027 runs from July 1, 2026 to June 30, 2027, and contains the whole winter season in one year.
A year-to-date P&L run on March 31, 2027 covers July 1, 2026 to March 31, 2027: nine months. The shop's W-2s or T4s are still issued for the calendar year 2026.
In the US and in Canada
In the United States
Sole proprietors generally use the calendar year because their business income goes on their personal return. Corporations can choose a fiscal year; partnerships and S corporations have restrictions on the year they may use. IRS Publication 538 covers the rules.
In Canada
Sole proprietors and most partnerships of individuals use a December 31 year-end, with a limited alternative method. A corporation chooses its fiscal period, which cannot be longer than 53 weeks, and files its T2 within six months of the year-end.
In AcboBooks
Company settings include the month the fiscal year starts. Year-End Close posts the closing entries for the year.
Related terms
Related on this site
Sources
- IRS Publication 538, Accounting Periods and Methods
- CRA: Fiscal period for sole proprietors and partnerships
Updated October 25, 2026. General information, not tax, legal or accounting advice. Rules and rates change; check with the IRS, the CRA, your state or province, or your accountant.
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