The ending balances of permanent accounts represent the beginning balances of such accounts for the following fiscal period.
What is fiscal period ?
- A fiscal period, also known as a fiscal year, is a 12-month period in which a business entity accounts for all transactions and events involving that company. The 12-month period does not always correspond to the calendar year, or January 1st to December 31st.
- A fiscal year is when a company accounts for all of its occurrences over the course of a year. Typically, businesses base their year on the calendar year. Because taxes are always calculated by the calendar year, this simplifies tax calculation.
- Companies use the fiscal period concept because it is easier to calculate financials if the company's financials resemble the company's natural business cycle.
- Many annual government fees are levied on a fiscal year basis, such as council tax and licence fees, but others are charged on an anniversary basis.
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