FUNDEMENTALS OF ECONOMICS 04/08/2022

BAHRIA UNIVERSITY ISLAMABAD

ASSIGNMENT # 01
CLASS: LLB 1 (B)
SUBMITTED BY: QAZI MUHAMMAD USMAN HAIDER
ENROLLMENT NO: 01-177221-048
SUBJECT: FUNDEMENTALS OF ECONOMICS
SUBMITTED TO: SIR ARSALAN KHURSHID
DATE: 8/4/22

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Q1. What is the difference between calendar year

and financial year Also define why financial year is
required for instead of calendar year?

 DIFFERENCE BETWEEN FISCAL YEAR AND CALENDER YEAR

In many elements of life, the terms fiscal year and calendar year are interchangeable.
While the fiscal year is more frequent in businesses, the calendar year is more often
used in everyday life. It's vital to understand the distinctions between fiscal and
calendar years because failing to do so could lead to financial errors. While both last
for a year, they can start on completely different dates. The fiscal year might
alternatively be based on the calendar year.

FISCAL YEAR CALENDAR YEAR

• It is a twelve-month period in which
businesses determine the start and finish
dates. A year in which business
organizations, firms, and corporations
choose to prepare their annual financial
reports.
• It is a 12-month period that begins on
January 1st and ends on December 31st,
and follows the framework of the
conventional calendar. A calendar year is
just the time it takes the Earth to complete
one rotation around the sun.

• Assists in the implementation of • And can be used in everyday activities.

financial statements and tax reporting in
businesses • Companies that use the calendar year
. reporting methodology will prepare their
• Companies that use the fiscal year financial reports/statements for the year
reporting technique may choose to prepare based on transactions that occurred during
their financial statements over a 12-month the first 365 days of the year.
period other than the fiscal year.
• It lasts from January 1 to December 31.
• It can start at any moment during the
year as long as it has 365 days.

EXAMPLES OF FISCAL YEAR

Although a fiscal year is one year long, it may not always relate to the calendar year. A fiscal year, for
example, can last from January 1 to December 31, like a calendar year, although not all financial years
do. This is because, depending on their accounting and auditing needs or procedures, various entities can

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choose when their fiscal year begins and finishes. As a result, when fiscal years differ from calendar
years, it's usually due to the nature of the firm.

EXAMPLES:
 U.S federal government: oct. 1 to sept. 30
 Nonprofit organizations: Many uses July 1 to June 30
 Microsoft corporation: End of June
 Apple Inc: last working day of September

FISCAL YEAR INSTEAD OF CALENDAR YEAR:

While the conclusion of the calendar year is more straightforward and usual, the
end of the fiscal year can provide a more realistic view of a company's
performance. Seasonal businesses are known for this. Many snowplowing
companies, for example, make the majority of their money between November and
March. To stick to a calendar year finish, dividing revenue between December and
January would make establishing a solid picture of the company's performance
during a single season impossible.

BENEFITS OF FISCAL YEAR:

1. CONSIDERATION OF SEASONAL PROFITS:

Seasonal businesses can set start and end dates that better fit with their revenue and expenses
by using a fiscal year other than the calendar year. As a result, using a fiscal year to offer a
more accurate picture of a company's financial performance might be beneficial.

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Walmart and Target, for example, have a different fiscal year than the calendar year since
they have a sales boost in December due to the holiday season. By switching to a different
calendar year, these businesses can postpone closing their year-end books until after the
holiday season is over.

2. HELPS AVOID TAX BURDENS:

Businesses that receive huge investments at the end of the calendar year but do not involve
huge expenses until the first months of the following year may face a tax penalty. This can be
avoided by using a different fiscal year.

3. AVOIDANCE OF TRADITIONAL TAX AND AUDIT SEASONS:

Because most tax preparation companies experience a rise in revenue from January to April,
sticking to a fiscal year that doesn't match with the calendar will help you get your
accountant's attention. This is because they are less busy at other times of the year if your
fiscal year ends on a different date.

Q2. Why is it necessary for any country to focus

more on exports than imports?
IMPORTS:
Imports are goods and services purchased from another country by a company or a customer.
As a result, resources are thrown out of the country that is buying foreign goods and services.
While most countries seek to export more goods and services than they import in order to
boost domestic revenue, a high level of imports might signal an improving economy. This is
especially true if the imports are mostly productive assets, such as machinery and equipment,
which the receiving country can utilize to boost its economy's productivity.

EXPORTS:
Exports are the goods and services that a country produces in its own country and sells to
companies or customers in other countries. As a result, the country selling the goods and
services receives an inflow of revenue. Companies may prefer to export their goods and
services to another country since it gives them the opportunity to participate in global trade.

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FOCUSING ON EXPORTS RATHER THAN

IMPORTS:
If you import more than you export, you're throwing more money out of the country than
you're receiving in.
On the other side, the higher a country's exports, the greater its domestic economic activity.
More exports signify more output, employment, and revenue. A country's gross domestic
product, which is the total value of the finished goods and services it produces in a given
period of time, grows if it is a net exporter. In other words, net exports raise a country's
wealth. It signifies that a country's manufacturing and industries are producing a lot of goods.
More exports imply more output, employment, and revenue. It will also help with other social
challenges, such as preventing crime.

Effect on Gross Domestic Product:

GDP=C+I+G+(X−M)
where:
C=Consumer spending on goods and services
I=Investment spending on business capital goods
G=Government spending on public goods and services
X=Exports
M=Imports

Exports minus imports (X – M) equals net exports in this equation. The net exports figure is
positive when exports surpass imports. This indicates that a country's balance of payments is
favorable. The net exports figure is negative when exports are less than imports. This shows
that the country is having a trade deficit.
A country's economic growth is assisted by a trade surplus. More exports indicate a high
level of output from a country's factories and industrial facilities, as well as a larger number
of workers employed to keep these firms running. When a corporation exports a large
amount of goods, it also means that money is flowing into the country. which
stimulates consumer spending and contributes to economic growth.

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THE END

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