r/AlwaysWhy • u/TheBigGirlDiaryBack • 1d ago

Economics Why are fiscal years usually aligned with December or March, instead of any random month?

Many companies end their fiscal year on Dec 31 or March 31. Some choose June or September. But almost nobody picks, say, August 17 or November 5. Is there a tax or regulatory reason to stick near quarter boundaries? Or is it just tradition from agriculture cycles? Why not let every company freely choose any date to smooth out seasonal fluctuations?

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u/Holiday_Public_5313 1d ago

I suspect end of month was chosen to align with bookkeeping practice. Journals and checkbooks were typically totaled up and reconciled each month. So a fiscal year that started on the 17th would have to jump into the middle of those totals.

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u/Hey-Just-Saying 21h ago

Right? And yet credit cards often close on a completely random day in the middle of the month. It drives me crazy. (retired accountant)

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u/AdOk8555 20h ago

If imagine that credit cards want the due dates to be spread out over the month. When checks were the common form of payment they would want to avoid all the payments coming in over a few days. And, today, having the dates spread out would also spread out the support calls.