Other Info From Chapter 1

Question 1

What is a fiscal year end? Why does a company’s fiscal year not always end on December ?

Answer 1

A fiscal year end is an accounting time period that is one year in length, but does not have to end on December 31. Corporations can select their fiscal year end based on when their operations are low or when inventory is low. Selecting a fiscal year end when operations are low provides more time for accounting staff to complete the year-end reporting requirements. If inventories are low, this simplifies the inventory count and minimizes the business disruption caused by counting the inventory.

Question 2

What are creditors? Lenders? Debtors?

Answer 2

GOOGLE:

Creditors are stakeholders who are owed money by the business on credit. Creditors are typically suppliers that have delivered goods or services to the business but the business has not yet paid the supplier for those goods and services. In effect, the supplier has loaned money to the business. The English word creditor is derived from the Latin word ‘crēditum’ meaning ‘to loan’. So in accounting, suppliers who loan money to the business are called creditors.

A lender is an entity which loans money with the expectation that the borrower will repay the loan with interest. The lender can be an individual, a bank, a pawn shop, or any other entity which loans money.

Debtors are stakeholders who owe money to the business. Debtors are typically customers who have taken possession of goods or services from a business but have not yet paid the business for those goods and services. The English word debtor is derived from the Latin word ‘debere’ meaning ‘to owe’. So in accounting, customers who owe money to the business are called debtors.