Finalization of Books of Accounts

Introduction

The most crucial function of financial accounting is to ascertain the financial position of the business and the profitability of the business. The trading and profit and loss account show the net profit and net loss of the business, while the balance sheet shows the financial position of the business. 

Finalization of the accounts means the preparation of the profitability statement and the positional statement of the business. Hence, accounts that are required to be prepared are as follows:

• Trading Account
• Profit and Loss Account
• Balance Sheet

These accounts are needed to be prepared according to the rules of financial accounting.

Checklist for Finalization of Books

•  No Entry on National Holiday.
•  Confirmation of S.Creditors (Specialy Those With Debit Balance.)
•  Confirmation of S.Debtors (Specialy Those With Credit Balance)
•  Bonus Sheet To Be Tallied With Bonus Paid In Cash And By Cheque.
•  Check Cash For Negative Balance.
•  Electricity Charges For 12 Months Entered Or Not.
•  Salary Sheet - Tally With Salary Paid In Cash+Cheque.
•  Salary of Employees Who Have Not Signed Salary Sheet Should Reflect As Payable.
•  Tally With Salary Summary For Whole Year.
•  Copy of All Full & Final A/C Papers Required.
•  Insurance Exp. - Pre-Paid Entries To Be Done. Copy of All Cover Notes To Be
• Kept In Balance Sheet File.
•  Other Pre-Paid Exp. Entries Like Licence Fee, AMC Etc.
•  Tally Opening Balance With Last Year Balance Sheet.
•  Reconcile Sale + Purchase With Sales Tax Returns, Lending Ratios.
•  Licence Fee - Receipt Or Covering Letters of Licence Copy.
•  Telephone Expenses - Bill of 12 Months Entered Or Not. Narration Similar To That of Electricity Exp.
•  Depreciation Entries.
•  Tally Tds Certificates With Relevant Ledgers.
•  Tally Tds Returns With Relevant Ledgers.
•  Reconcile All Bank Accounts.
•  G.P. Rate Comparison With Last Year.
•  Audit Fee To Be Entered.
•  Check Cash Exp. Vouchers.
•  Check All Debit Notes / Cr. Notes. Should Be Signed
•  Check All Cash Receipts. Should Be Signed
•  Check All Discounts To Customers Or Short & Excess Or Bad Debts Vouchers Should Be Signed.
•  All Heads In Previous Year P&L, Trading Balance Sheet Should Be In
•  Current Year Balance Sheet And Comparison of Amount To Be Done.
•  Challans of All Govt. Dues To Be Enclosed With I.T.R., VAT / CST/ESI / EPF / TDS Etc.
•  Exp. Payable Entries: Tel., Electricity, Water Etc.
•  Freight Inward For All Central Purchases Should Be Entered.
•  Transfer Previous Year Pre-Paid To Relevant Expense Head.
•  Check Payment of Previous Year Expenses Payable.

How to Finalize an Account

STEP 1: Make a recording.

• Check for transactions that haven't yet been entered into Reach Accountant Software. 
• If you have got any unpunched bills or invoices, confirm they're entered into the software.

STEP 2: Reconcile your finances.

• Print and reconcile the Bank Book with the bank statements.
• Prepare an announcement of Bank Reconciliation.
• Reconcile cash balances and check funds, Imprest, and open claims.
• Make a physical stock check using the Physical Stock Report (Compilation Stock Report).
• Reconcile the sales figures with any VAT, Service Tax, or Excise Returns you will have previously filed.

STEP 3: Make any necessary adjustments before closing the books.

• Pass journal entries to correct missing stock after you've completed the reconciliation.
• Add in any missing bank and cash transactions.
• Bad debts should be corrected or written off.
• Depreciation entries should be passed.
• To shift current earnings to retained earnings a/c, make a journal entry. This enables you to start the New Year with a fresh profit counter.

STEP 4: Compile the ultimate Accounts.

• Print the Daybook, Ledgers, balance, Profit and Loss Account, and Balance Sheets after you've finished the previous procedures.
• Extracting them into excel or pdf and saving them to your Google Drive or Dropbox may be a better idea.
• Accounts are frozen by visiting Settings>>Freeze entries.

STEP 5: Submit your financial statements for audit

• You can easily let your auditor access your account by creating a user account.
• To make his job easier, an auditor can use audit tools and pass adjustment entries.

STEP 6: In-Reach Accountant, create a replacement fiscal year.

• Create a replacement of twelve months in Reach if possible.
• If your accounts are closed, ensure you select to automatically carry over your balances.
• Creating a brand-new year without importing the opening balances if the finalization isn't yet complete for the year

Concept of Finalization of Accounts

In the balance sheet, these are the main issues: 

• Schedule III Rounding Off Format 
• Reconciliation of the number of shares in the company
• Period of reporting
• Placement in a private setting
• Long-Term/Short-Term borrowings