Fiscal year for new firm - more than 12 months?

ERPNext Accounting
#1

Hi,

For a new firm whose first period would be more than 12 months (due to the mid year incorporation), what is the recommended approach to set the fiscal year?

Should a fiscal year be created for the part year and another for the next full year?

I note it is not possible to create a fiscal year for longer than 12 months.

Thanks for any advice.

#2

I think tax year cannot be of more than 12 months? Similarly year has to close as per companies law and I guess that would be either Dec or June.
Does it really happen that mid year incorporation will have fiscal year beyond the annual close or tax year or fiscal year ending date?

#3

Thanks Faraz.

For an LLP incorporated beyond a certain point in the year, the LLP has to
file the first return only the next year for more than 12 months span.

I am thinking that drives how the fiscal year has to be set up on the
accounting system?

Should it be a fiscal year for the part (2-3 months) and another fiscal year for the fresh year (or) is there a way to have the fiscal for longer than 12 months (say 14-15 months)?

Chandra

#4

In Belgium this is possible the first year after starting a new company.
I for instance have my fiscal year running from July until June.
First year I started in November.
First Fiscal year ended 19 months later.
After this the fiscal years are always 12 months.

#5

Ok, I got that, I forgot about half year or beyond rule of incorporation having different impacts accordingly to regional law.
But it seems it will not fit in the system as it takes 12 months in a fiscal year.
What I could have suggested to the company that carry on and close for partial months ending on actual date; and then start fresh year as you already said in the last point. For reporting purposes that whole fiscal year and partial months before that are to be merged using some BI Tool or Data Extracted in excel form etc.

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#6

Thanks, did you set it up on erpnext for 19 months?
It looks like it enforces 12 months.

#7

Okay, so for the first (part) year, we basically open up a full fiscal year with a back date that is even before the firm’s incorporation, since the fiscal year has to be a full year.

Did I get that right? Thanks.

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#8

You can do a shortened fiscal year for the year of incorporation and then regularize with standard calendar year in the following year.

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#9

Hi Chandra, I have only started using ERPNext in the past 3 years. I was then well already beyond the 19 month period.
I do would like to use it for other new companies, so I would also like to see this functionality in ERPNext.

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#10

The fiscal year appears to save successfully for part year but when the fiscal year is opened after save, I see it actually takes the full year from the start date.

Not sure if this is expected functionality or a bug.

Edit:
Thinking about it, if the Indian Govt. resets the fiscal year to calendar as being discussed, this becomes essential functionality to allow part year as fiscal year?

#11

Any more thoughts please?

#12
  1. Calendar Year Setup is possible but overlapping with any of the existing Months in any of the Fiscal not allowed.
  2. Yes, it takes full year i.e. 12 month from starting date and it is defined in this way so it is as per functionality.
  3. Suggestion assuming incorporation Nov 16 having July - June FY;
    3.1 Make a FY 2016-2017 and Freeze up to October End so that there will be no entries before that.
    3.2 Enter transactions till June end and close the year to carry forward all the balances.
    3.3 Carry on with transaction from July onwards and at the end close the year by June end.
  4. In future ERPNext might have the functionality to Recalculate Fiscal Year / Change Fiscal Year / Partial Fiscal Merger etc. but indeed I am not sure of it :slight_smile:
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