Definition: The term end of year refers to the conclusion of either a calendar year or a fiscal year. In other words, it points out to the year’s closure.
What Does End of Year (EOY) Mean?
In business, the EOY can be defined as the end of the calendar year or the fiscal year. The calendar year is the twelve month period that starts on January 1 and ends on December 31. In this case, the EOY will be December 31.
On the other hand, a fiscal year is a twelve-month period defined for accounting purposes. This period might be different from the calendar year, which means that it might start on a day different than January 1.
This one-year accounting period is established to suit a particular need of the company, since sometimes issuing a financial statement at the end of the calendar year is a though task because of the high volume of transactions going on at the time. This difference between a calendar year and a fiscal year is normally recognized by tax authorities and companies are normally free to declare and pay taxes at the end of their fiscal (not calendar) year.
Example
For example, Big Bikes LLC is a company that sells imported bikes to retail customers in 4 different states of the U.S. through a chain of 20 stores located in highly-populated areas. The company is currently reviewing its accounting procedures and policies and the company’s Head Accountant advised the owners to change its fiscal year.
They were currently working with a fiscal year equal to the calendar year but the Head Accountant pointed out that this was affecting financial procedures negatively since the company experienced a sales peak between January and March because many people started buying new bikes to exercise after Christmas.
The fact that the fiscal year ended in December meant that the accounting team had to work on the financial statements between January and March, and they also had to handle the bookkeeping and reporting duties of a high-sales season. He pointed out it was a nightmare for the team.
After reviewing the matter the owners decided to change the fiscal year to start on April 1 and end on March 31.
