Tyms

Year-End Close

Year-end close is the process of finalising a business's accounts at the end of its fiscal year, completing adjustments, reconciliations and closing entries, so annual financial statements and tax returns can be prepared and the books are ready for the new year.

What is year-end close?

The year-end close builds on the [month-end close](/glossary/month-end-close) with extra steps for the full [fiscal year](/glossary/fiscal-year). It often feeds an audit, the annual tax return and statutory filings.

Year-end close checklist

  1. Complete the final month-end close.
  2. Count inventory and value it at the lower of cost and [NRV](/glossary/net-realisable-value).
  3. Review [fixed assets](/glossary/fixed-asset) for additions, disposals and [impairment](/glossary/impairment).
  4. Review receivables and update the [allowance for doubtful accounts](/glossary/allowance-for-doubtful-accounts).
  5. Record year-end accruals, prepayments and [provisions](/glossary/provision).
  6. Reconcile all balance sheet accounts, including loans, tax and payroll.
  7. Calculate income tax and deferred tax.
  8. Review the [trial balance](/glossary/trial-balance) and post adjusting entries.
  9. Prepare the [financial statements](/glossary/financial-statements).
  10. Post closing entries to move income and expense balances into [retained earnings](/glossary/retained-earnings).
  11. Lock the year and roll forward [opening balances](/glossary/opening-balance).

Closing entries

Income and expense accounts are temporary; they reset to zero each year. Their net balance ([net income](/glossary/net-income) or loss) moves to retained earnings. Accounting software usually does this automatically.

Tips

  • Start planning weeks before year-end.
  • Keep a documented checklist and assign owners.
  • Agree deadlines with your accountant or auditor.

Further reading

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