Completing the Accounting Cycle LO 6 – Comparing the Fiscal Year with the Natural Year

LO 6 Accounting Period The annual accounting period adopted by a business is known as its fiscal year. When a business adopts a fiscal year that ends when business activities have reached the lowest point in its annual operation, such a fiscal year is also called the natural business year. The annual accounting period adopted by a business is known as its fiscal year. Often, a business adopts a fiscal year that ends when business activities have reached the lowest point in its annual operation. This is known as a natural year.

LO 6 Accounting Period Fiscal years begin with the first day of the month selected and end on the last day of the following twelfth month. The period most commonly used is the calendar year. A corporation may adopt a fiscal year that ends when business activities have reached the lowest point in the annual operating cycle. For example, a ski resort probably would end its fiscal year after the snow season is definitely over. A fiscal year runs for twelve consecutive months. The most common fiscal year is the calendar year. Many businesses adopt a fiscal year that ends when their business activities have reached the lowest point in the operating cycle. For example, many retailers end their fiscal year in January, after the holiday rush is over. The fiscal year of a ski resort would end the month after the ski season is over.

LO 6 Accounting Period This slide depicts the percentage of companies with fiscal years ending in the different months. It’s obvious that a year ending in December is most common.

Financial History of a Business LO 6 Financial History of a Business The financial history of a business may be shown by a series of balance sheets and income statements for several fiscal years. The income statement shows the results of operation for a fiscal year, and the balance sheet shows the balances of the assets, liabilities, and stockholders’ equity at the end of the fiscal year.