At the end of each accounting year, it's necessary to perform certain procedures to ensure the smooth closure of your accounting year. Closing the financial year is easily performed and if necessary you can re-open a closed year which will place all accounts and balances as they were prior to closing. This document lists the procedures to cover when looking to close down your financial year.
The creation of the new accounting year is essential prior to closing down the previous year as the closing balances will then be posted to your new accounting year as the opening balances for your balance sheet.
Before proceeding to close your financial year the balance sheet accounts should be reconciled and any assets should be checked with the view of depreciating and fixed assets for the year.
Calculation of accruals and prepayments
At the end of each accounting year, it maybe necessary to make accounting entries that allow for any costs that are due but yet to arrive, these items are treated as accruals, a provision can then be made for these and reversed when you receive the suppliers invoice. Likewise any sales that may have been invoiced for in advance and yet to happen within the financial year should be treated as deferred sales for the following year and not included in your income statement.
Printing inventory at the end of the year
The quantity in stock of each product and its value should be checked and the value matched with the value on your balance sheet stock account. Within Reports it is possible to process the Warehouse Inventory report which will give you the total quantity and value of your stock enabling you to check this.
Closing and reopening of accounts
Closing the financial year is easily performed and if necessary you can re-open a closed year which will place all accounts and balances as they were prior to closing. Any adjustments can then be processed and the year can then be closed again.
VAT Reporting & Printing
Your VAT Return, even though you may not be filing it to HMRC should be checked at the year end making sure the balance on the VAT Return agrees with the VAT liability on your balance sheet.