As the financial year draws to a close on March 31, 2024, businesses are required to undertake a thorough review and closure of their books of accounts. This process is critical for ensuring the accuracy and completeness of financial records, complying with regulatory requirements, and preparing for the upcoming fiscal year. This article outlines the essential tasks and considerations for businesses as they approach the year-end closure of their books of accounts.
Year End Closure of Books of Accounts:
A systematic review of books of accounts to ensure completeness in all respects to the books of accounts which involves the following:
- Before closing your books, ensure that they are truly and fairly updated. There should be no possibility of changes in accounts.
- Passing of all transactions till the last date of the financial year, including sales, purchases, payments and receipts.
- Getting third-party confirmations to ensure the balances agree with our books.
- Passing the non-cash expenses (Depreciation, amortisation etc.)
- Passing of accrual entries deferred entries for expenses and revenue.
- Entries for provision.
- Proper recognition of revenue.
- Valuation of Inventory by doing the physical count and adjusting the inventory value after considering their market value or obsolescence.
- Verify fixed asset records and reconcile them with physical assets to ensure accuracy and dispose of the assets that will no longer be useful.
- Verify that all compliances have been compiled, especially with income tax and GST authorities.
- Verify that all compliances have been complied with Companies Act, 2013.
A part from the above, the most essential treatment for this year end will be the taking of effect of section 43B(h) of Income Tax Act, 1961.
Task before Finalization of Books of Accounts:
1. Whether all the purchases which are for the business purpose are reflected in the accounts and its reconciliation has done.
2. Whether all payment made to supplier as per section 43B(h) of Income Tax Act.
3. Whether Tax Deducted on Purchases, Salary and the other expenditure wherever TDS is applicable.
4. Whether Sales invoices have been received in respective of advance payment.
5. Whether TCS collected on sales invoice wherever TCS is applicable.
6. Whether your bank accounts have been reconciled.
7. Whether you have complied with the new provision introduced for current financial year. You should be extra take care for this because there are higher chances of non-compliances of new provisions introduced for current financial year.
8. Whether all the payments made for non-business purpose are reflected properly.
9. Whether you have collected amounts from debtors on due dates and recorded properly.
10. If buyer not paid amount on time, whether you have intimated to buyer for Interest as per MSMED Act (if applicable).
11. If there is a bad debts then make a proper plan and take appropriate action that how the amount can be recovered.
12. Whether IGST under RCM properly recorded against import of goods (If applicable).
13. Creditors for more than 180 days, whether ITC reversed or not.
14. If payment made to creditors after 180 days, whether reversed ITC taken back or not.
15. Whether all purchases and sales reconciled with the GSTR 1, GSTR 2B and GSTR 3B.
16. Whether there is any demand or refund received during the year adjustment has been done.
17. Reconcile salary structure with return submitted with various departments (PF, ESI etc)
18. Whether are you eligible for any subsidy? If yes, whether claimed and received or not.
19. Whether the new labour laws have been complied or not (if applicable.)
20. If it seems to you that it’s a lengthy task and required specific skills. It should be done by professional only because now a days non compliance cost is heavier than the cost of professionals.
21. The provisions of the audit trail apply to all companies (If it governed by the Ministry of Corporate Affairs) from this year. Essentially, any company registered under the Companies Act, 2013 must comply with the audit trail requirement.
Conclusion: The closure of books of accounts as of March 31, 2024, necessitates meticulous planning and execution. Adhering to the comprehensive checklist outlined above will ensure that businesses not only meet their compliance obligations but also set a solid foundation for the new financial year. Given the complexities involved, engaging professional assistance is advisable to navigate the process efficiently and avoid the high costs associated with non-compliance. As we move forward, the emphasis on digital compliance and audit trails will likely increase, making it imperative for businesses to continuously enhance their accounting practices and systems.
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Really helpful.. Thank you sir for your insights
Great article! This not only gives awareness to the management but also helps us auditors to prepare checklists and makes the entire process easier.
Really liked the post. Good for review on the key areas required for yearly closing.