How do I choose a financial year?

I registered a company and bought a copy of MoneyWorks accounting software in March 2024. I want to set up my company file.

I launched the software, clicked on the File menu, selected New from the dropdown menu, and clicked the New MoneyWorks Document (company file). It prompted me to enter a file name, and I decided to use my company name, 'ABC Company'. I saved the file, and MoneyWorks asked me to enter my setup information. I clicked the Company button, entered my company name, address, and registration number, saved it and proceeded. I clicked the Period button, and it asked for Financial Year, which shows a dropdown list of Jan-Dec, Feb-Jan, Mar-Feb, ..., Dec-Jan.

What is a financial year, and which option should I choose?

A calendar year is a one-year, twelve-month cycle that begins with January, when we celebrate New Year's Day, and ends with December. Depending on your business's country, the financial year may follow the calendar year from January to December, or some may allow you to have a financial year-end in any preferred month other than December—a financial year-end is the last day of your accounting period. Some typical financial year-end choices are 31 March, 30 June, 30 September, and 31 December.

In Singapore, the accounting period can be twelve months or fifty-two weeks. Of course, most accounting software makes it easier to manage the month than the weeks. Consult your accountant if you need help choosing a financial year-end.

In the above case, I registered my business in March 2024; I have an option of having my financial year:

Feb-Mar: from February 2023 to March 2024.

Yes, I registered in March 2024 and closed the account the same month. Only a few would do this, but it's still possible. If you prefer the financial year-end in March, most will close their books as of March 2025 instead of March 2024. Thus, you would have thirteen months of accounting period for the first closing instead of twelve.

If there are transactions, such as a fund introduced and deposited into the bank or some expenses incurred, I could close my account as of March 2024 (one-month data) and set my financial year as February 2023 to March 2024 (Select Feb-Mar) with starting year as 2023/24. The next year-end would be March 2025.

Mar-Feb: from March 2024 to February 2025

To have a full twelve months of accounting, I can set my financial year from March 2024, end the account by February 2025 (Select Mar-Feb), and use 2024/25 as my starting year. The subsequent financial year-end would be February.

Jan-Dec: January 2024 to December 2024

I can follow the calendar year from January 2024 to December 2024. I keep a twelve-month accounting period with no data in January and February since I registered the business in March 2024. The subsequent financial year-end would be December.

December is typical for many accountants and business owners, but I must consider holiday celebrations and staff taking annual leave during the year-end. I want to avoid calling for stocktaking and realise I only have half the staff strength.

Less than twelve months

Of course, if I prefer not to follow the calendar year (January to December), I can choose any month—for example, September 2024 (seven months from March 2024). Then, I could set my financial year in MoneyWorks as 'Oct-Sep' for October to September and have the starting year as 2023/24.

In this case, I printed my first set of Income statements from October 2023 to September 2024, which gives me the data from March 2024 to September 2024 (seven months) with no transactions from October 2023 to February 2024 (five months). The subsequent financial year-end would be September.

More than twelve months

For a newly incorporated company, you could operate more than twelve months before your first closing (or change of financial year-end). Please refer to the IRAS website 'Basis Period' for more information.

Let's assume I preferred to close my accounts in June 2025. Based on a twelve-month accounting period, my starting month is July 2024. Therefore, I must select my financial year in MoneyWorks as 'Jul-Jun' for July to June. However, March 2024 falls into the financial year from July 2023 to June 2024. In this case, I must set the starting year as 2023/24 and leave the accounting period empty from July 2023 to February 2024 (eight months).

Two sets of Income statements have to be printed for audit (2 years of assessment (YA): one from July 2023 to June 2024 (four months of accounting from March 2024 to June 2024) and another from July 2024 to June 2025 (twelve months of accounting). In total, you have sixteen months of data.

A newly incorporated company's first YA (year of assessment) is usually less than twelve months of accounting. Subsequent financial year-ends can, therefore, remain constant, for example, June.

If you realise that you set the financial year incorrectly or decide to change it after operating, you must create a new file and re-enter (or import) the transactions. It could be tedious. It is better to consult your accountant before you set up your account.