As the fiscal year draws to a close, several important accounting procedures must be completed to finalize accounting balances and prepare financial statements. These steps are necessary to provide a basis for accountants to record accounting transactions at the end of the fiscal year. So, what are these procedures and how are they performed? EXPERTIS invites you to read the details below.
1. Confirmation letter from the bank regarding the financial data.
This is one of the most important procedures to complete at the end of the year. Without reconciling bank statements, such as those for checking accounts and loan accounts, you cannot ensure that all financial activities have been fully recorded and are in the correct chronological order. Furthermore, this reconciliation should be done regularly, ideally monthly, rather than just at the end of the year.
Reconciling data with the bank helps detect and identify the reasons for any discrepancies in the ending balances of your books and bank statements, and allows for timely adjustments to any items that have not been fully accounted for.
2. Inventory check
If your company has inventory balances at the end of the year, you should plan to conduct a count, determine the condition, and value of the year-end inventory. From there, adjust the inventory accounting records to reflect the items found during the count. During the inventory count, you must also identify any slow-moving, substandard, damaged, or obsolete inventory to make provisions for inventory devaluation in accordance with current regulations.
3. Cash count
Year-end cash count is the process of physically counting cash on hand and comparing it with records kept in the accounting books. This cash count should be performed by the accountant at the end of the year so that any discrepancies can be accurately recorded and adjusted in the books, helping the business to promptly detect any losses or fraud related to company assets.
4. Accounts receivable and accounts payable
The company must accurately determine the amount owed by customers (accounts receivable) and the amount owed by the company to suppliers and other parties (accounts payable) at the end of the fiscal year. Reconciling accounts payable with customers (possibly through confirmation letters) and suppliers at least once a year is crucial. The company also needs to prepare detailed reports tracking accounts payable by entity, reports on overdue debts, and tracking the aging of debts. Through this, it is important to observe and assess whether there are any discrepancies in the reports to identify any unusual or inaccurate balances.
This is also the time when the company makes provisions for doubtful receivables, or writes off debts based on the company's assessment and applicable regulations. The provision for doubtful receivables is considered a business expense.
5. Assets
Besides ensuring that all transactions involving the acquisition (purchase) of fixed assets during the year are accurately and completely recorded, the recording of assets sold or disposed of is equally important. A year-end inventory of fixed assets must be conducted and compared with the books to ensure the existence of the assets.
6. Pay taxes
Taxes are a crucial and mandatory part of any business operation. Failure to declare and pay taxes on time can lead to administrative penalties and late payment interest. Therefore, the company needs to review its business operations and the types of taxes it is required to pay according to the law at the end of the year and the beginning of the new year.
7. Invoices and supporting documents
Issuing output invoices or input invoices at the wrong time at the end of the year will affect the correct period recognition in the financial accounting reports. Therefore, the Company needs to check all output and input invoices at the end of the year, ensuring that all invoices are issued correctly and completely according to current regulations.
The above are the tasks and procedures that businesses need to be aware of and complete at the end of the year. For any remaining issues, businesses can contact EXPERTIS's service department for assistance.