Year-end Closing Accounting

The annual accounting closing is a time-consuming process and it is determined by many factors that determine the company. Depending on the legal status, the subject of activity and the economic sector, the annual accounting closing could include a variety of legal requirements and accounting execution models. The environment also affects the year-end accounting closing of companies. Depending on the country's economy and corporate stakeholder relations, the preparation of an annual financial report could require different actions on the part of the accounting department or law firm. In the ideal case, the annual closing of the accounts necessarily requires the preparation of an organized preparation that allows the correct reporting of the available documentation reflecting the company's activity during the past reporting period.

The annual accounting close is a specific process of summarizing the company's activities during the past fiscal year. The legal framework determines that the annual accounting close must coincide with the end of the calendar year. There is also periodic accounting closing, which is performed for internal company purposes and may be scheduled for shorter time periods. The annual accounting closing basically represents the closing of the income and expenditure statements and preparation of an annual financial report but the entire process of performing an annual accounting closure involves much more thorough organization, analysis, corrections, and professionalism to ensure the credibility of the final report.

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In order to guarantee the organization of the necessary documentation for the annual accounting closing and, above all, to submit the accompanying declarations within the agreeable terms, it is accepted to start the procedure for the implementation of the annual accounting closing at the beginning of the last calendar month. Strict planning of the stages through which the annual accounting closure passes can guarantee us peace of mind during this procedure. At the same time, we can trust the annual accounting services of an accounting office that has the necessary experience in organizing and shaping the complete documentation.

The annual accounting closing requires a preparation made in advance, of an internal schedule by the compiler of the annual financial report. This schedule must present the separate stages of the annual accounting closure by terms of execution, materially responsible persons and types of reports. After the schedule is accepted by the managers of the company, an order is issued to confirm the distribution of duties in the execution of the annual accounting closing.

The preparation for the annual accounting closing begins with the processing of the primary accounting documentation, which must be put in order, in accordance with the requirements of the Accounting Law. All relationships with partners that arose and ended during the year, as well as partnership agreements of the company, are analyzed. For the needs of the annual accounting closure, interest is charged on granted and received commercial loans from partners, invoices are issued for rent installments with expired terms and expenses for those due are reported. During the preparation for the annual accounting closing, a review of the judicial and awarded receivables and liabilities is made, as well as the financial relations are settled according to tax audit acts.

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The annual closing of accounts also considers intra-company relations with employees, such as accounting all relations for provided advanced payments and expenses for business trips in the country and abroad. The preparation of the annual accounting close also deals with those that arose during the reporting period:

• complaints
• donations, sponsorships and other reasons for providing funds gratuitously

The official annual accounting close requires an inventory of the company's assets and liabilities as of the balance sheet date. The accounting law provides for the regular performance of an inventory to ensure their correct presentation in the annual financial report. The management of the company only determines its model of action according to the needs of the business and the preferences of the accounting department or the recommendations of the external accounting firm. The annual accounting closing covers tangible fixed assets (TPA), with the aim of correcting any differences between the actual assets and their accounting-documented expression. In parallel with the TPA, in the process of annual accounting closure, the following are inventoried and checked:

• short-term assets
• the cash of the company in the respective currencies
• capital investments in other enterprises
• the funds paid in advance

The inventory of the company's liabilities at the time of the annual accounting closure aims to establish the actual valuation of each liability against the data from the accounting registers. Liabilities are distinguished as current and non-current and on this basis their reporting in the documentation of the annual accounting close is determined. When establishing an obligation with an expired statute of limitations, it should be written off from the company's liabilities, reported in the financial statement during the annual accounting closing.

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The stages of annual accounting closure include checking the accumulated depreciation during the year and review for changes in the useful life of non-current assets. Accountants should also review the useful life of fixed tangible assets and note the possible adjustment, as well as discard those TPAs that are fully depreciated for the needs of the company.

The following parameters are also taken into account for the inventory of assets and liabilities during the annual accounting closing:

• Age analysis of customers intake
• Overdue customer takings/obligations review
• Verification of expenditure in relation to staff income
• Check for conditions for recognition/change of provisions
• Checking the technology of closing accounting accounts
• Calculation of current and deferred taxes

The Procedure of Year-end Closing Accounting

What is year-end closing accounting?

Preparation for annual accounting closing

Inventory in terms of annual accounting closing