Annual accounts – cleverly done!
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For most enterprises the annual accounts will soon take place. Our dossier on this behalf will cover several parts of the balance sheet and the profit and loss statement.
Before you start, you should collect all documents needed for the annual accounts. This includes bank statements, inventory lists, lists of open positions for customers and vendors, calculations of depreciations and many others.
Of course, an analog closing file is sufficient, in which you collect all needed original documents and proofs. However, we recommend preparing a digital annual closing file. An electronic file is much easier accessible for everyone involved into the work. If during one of the following closings the same issue comes up again, you will not have to get several folders but can easily access the documentation for several years with a click. If your accounts have to be audited the data can also easily made accessible to the auditors. And – there is no risk that original documents will be lost.
The fastest way to get to a result is to go through the financial accounts item by item and always ask the following questions:
In many cases there is a proof (bank statement, social security account excerpt etc.). If such proof exists, you have to check if the respective account of your financials lines up with this proof. If YES, everything is fine. If NO, differences have to be determined and the necessary booking have to be done.
Often a counterpart exists (for a current account, a loan or receivables and liabilities etc.). The documents of the counterparty (invoices etc.) have to align with your accounts or in some cases even a copy of the underlying contract or balance of account have to be asked for.
Valuations are a key element of accounting. They are necessary for many balance sheet items. Receivables, for example should be checked for their credit standing. If receivable or liabilities in foreign currencies are on your balance sheet the necessary forex adaptations have to be done. These are only two of many valuation examples.
Between many items of your balance sheet and profit and loss statement there is a links. If interest bearing positions are to be found in your balance sheet the interest income or expenses can be checked at the same time. Done at the same time this accelerates the closing process a lot.
Let’s take interest expenses: If compared with the interest-bearing liabilities a percentage results that is far above the usual interest rates, the plausibility has to be checked. There can be a simple cause such as a loan repayment shortly before the year end. Therefore, the interest-bearing liabilities have been strongly reduced whereas the interest expenses had to be booked for almost all year.
The basic considerations for an annual closing have been shown in this article. They have to be repeated for most balance sheet items and therefore have to be done almost all the time. If done this way every item can be finalized in one run and you can build on the respective result for your next steps.
If you have questions concerning your annual accounts or accounting in general our expert Andreas Okle is more than ready to help you along. Just get in touch.
