Calendar year

Definition

A calendar year is the one-year period that begins on January 1 and ends on December 31. It is commonly used as a standard timeframe for financial reporting and adjusting entries.

5 Must Know Facts For Your Next Test

1. Financial statements often cover a calendar year to ensure consistency in reporting.
2. Adjusting entries are typically made at the end of the calendar year to update account balances.
3. A calendar year aligns with the Gregorian calendar, making it universally recognized and utilized.
4. Businesses may choose a different fiscal year, but many align their reporting with the calendar year for simplicity.
5. Revenue recognition and expense matching principles often require adjustments based on the calendar year's timeline.

Review Questions

Related terms

Fiscal Year:

A one-year period that a company uses for accounting purposes which may or may not align with the calendar year

Adjusting Entries:

Journal entries made at the end of an accounting period to update account balances before preparing financial statements

Accrual Basis Accounting:

An accounting method where revenue and expenses are recorded when they are earned or incurred, regardless of when cash transactions occur