What is a financial year?
- By Book Keeping Pros
- Sources checked 15 Oct 2026
Definition
A financial year is the 12-month period a business uses for its accounts and reports. In Australia the financial year runs from 1 July to 30 June, and it is usually named by the two calendar years it spans, such as the 2026-27 financial year.
Year-end bookkeeping happens around the last day of the financial year: reconciling every account, reviewing unpaid invoices and bills, and producing the profit and loss statement for the year and the balance sheet at the last day of the year. Doing that work early in July, while June's statements, receipts and supplier bills are still easy to find, gives the owner and your accountant a settled set of figures to work from.
Monthly and quarterly reports usually follow the same year, so the first quarter of an Australian financial year is July to September. The second quarter runs from October to December, the third from January to March and the fourth from April to June. A year-to-date report covers 1 July up to whatever date is chosen, which lets an owner compare progress with the same point in the previous year.
When a new financial year begins, only asset, liability and equity accounts carry their balances across. Income and expense accounts start again from nil, and the old year's profit or loss is moved into equity. That is why each year's profit and loss statement starts fresh, while a balance sheet keeps building on the years before it. Many businesses also lock the old year once it is finalised, so a late entry cannot quietly change figures that have already been reported.
In Australia
business.gov.au describes the financial year as a 12-month period, and says that in Australia it starts on 1 July and ends on 30 June.
Its guide to managing cash flow calls the end of the financial year a good time to review your finances and results against the goals you set at the start of the year, and to set new goals and priorities for the next one. Its year-end checklist also suggests checking the business plan and marketing plan to judge whether current strategies are working, and the guide says its end of year tasks help a business notice cash flow risks, look for ways to improve its cash flow and plan for the year ahead.
Common mistakes
- Entering a late June transaction with the date it was keyed in, which pushes it into the next financial year.
- Comparing nine months of this year with the whole of last year and reading the gap as a fall in sales.
- Changing entries in a year that has already been finalised, so the closing balances no longer match the figures given to your accountant.
- Naming a year by one calendar year only, so it is unclear whether 2026 means the year ending 30 June 2026 or the one starting 1 July 2026.
- Leaving June's bank reconciliations until months later, when missing receipts and unexplained items are much harder to sort out.
Common questions
When is the financial year in Australia?
What is the difference between a financial year and a calendar year?
Is a financial year the same as a fiscal year?
Why is the end of the financial year important?
Related terms
Related service
Small business bookkeeping
Your books kept current, every month.
Sources
- Key financial terms
business.gov.au, Australian Government. Current at 15 October 2026, released 9 July 2024. Checked 15 October 2026.
© Commonwealth of Australia 2020, licensed under CC BY 3.0 AU. Licence: CC BY 3.0 AU.
- Guide to managing cash flow
business.gov.au, Australian Government. Current at 15 October 2026, released 22 December 2025. Checked 15 October 2026.
© Commonwealth of Australia 2020, licensed under CC BY 3.0 AU. Licence: CC BY 3.0 AU.