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Fiscal year

Bookkeeping and accounting in business or other organizations is required by regulatory laws to be done for periods of 12 months, resulting in "annual" (= "yearly") reports. This 12-month period is called a fiscal year, and it can end on the last day of any calendar month, but a new company or business has to decide at the beginning what year to use and then stick with it.

Companies that are units within a "group" of businesses must all use the same fiscal year, otherwise it would be possible to shift entries between units with different fiscal years, so the same resources would be counted more than once or not at all, making the annual report of the group's finances misleading.

In the "Enron scandal" in the U.S. in 2001-2002, that energy conglomerate was discovered to have gotten around the laws to prevent that kind of fraud by setting up dummy businesses that passed the bookkeeping entries back and forth, increasing their size on each pass, thus shifting the bogus numbers in space instead of in time.



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