Every year-end, finance teams go through the same routine: closing the books, making adjustments, and getting the accounts ready for audit. It sounds simple in theory, but anyone who has actually done it knows how messy or difficult things can get. A missing invoice, unreconciled bank entry, or a small error in ledgers can easily throw the entire process off track.
Over time, We have realised that if you follow a sequence and don’t skip the basics, the work becomes much more manageable. Here’s how I generally approach finalisation:
1.Closing the Books
First, make sure all entries are passed whether it is depreciation, provisions, accruals, prepaid expenses. Many times, We have seen companies where payment is booked but the expense is not, or bank entries are half-pending. These small lapses create big confusion later. So before moving ahead, clean this part thoroughly.
2. Reconciliations (the life saver or most important part of finalizing the books of accounts)
- Bank: Match the bank balance with the books. Don’t leave reconciling items unexplained, tomorrow the auditor will ask the same question.
- Debtors & Creditors: Scrutinise the ledgers. Small and mid-sized companies often miss linking payments with invoices, which gives a wrong picture of balances. Ledger review usually fixes these issues. Getting balance confirmations from parties is even better.
- Taxes: Always match GST, TDS and income tax with government portals (GSTN, TRACES, 26AS). If something doesn’t match here, it will become an audit point.
3. Assets and Liabilities
Update the fixed asset register, check depreciation, and account for disposals. For stock, physical verification is important and valuation should be at cost or NRV, whichever is lower. Also, review loans, advances and liabilities to ensure they are not overstated or understated.
4. Compliance Angle
Finalisation isn’t just accounting. PF, ESI, GST, TDS all these statutory dues should be checked and cleared. For examples whether the sales recorded in the books match with the sales reported in GST returns, and whether the Input Tax Credit (ITC) claimed tallies with what’s reflected on the GST portal. Basically, every compliance should be backed with proper reconciliation. Another area that often slips through the cracks is related party transactions, loans or guarantees. These require proper documentation and approvals from the Board as per the Companies Act. If not reviewed carefully, they usually end up becoming audit points later.
5. Drafting Financial Statements
Once everything above is clean, then prepare the Balance Sheet, P&L and Cash Flow as per Schedule III. Don’t underestimate the notes to accounts as they’re often more useful to readers than the numbers themselves.
6. Internal Review
Before sending it all to the auditor, I prefer to do one round of internal review. Scan unusual balances, prepare working papers, and ensure every major number is backed by a schedule. This extra step reduces audit queries significantly.
7. Auditor Interaction
Auditors will always ask questions that’s their job. Be open with them, provide reconciliations, and if they suggest adjustments, evaluate and pass them where necessary. A smooth audit comes from cooperation, not confrontation.
8. Approval and ROC Filing
After audit, the financials need board approval and later shareholder approval in the AGM. Then comes the ROC filing part (AOC-4, MGT-7, etc.). Many companies delay this, but timely filing saves penalties.
9. Keep Records Ready
Once everything is done, organise all reconciliations and schedules properly. You never know when these files will be needed again during assessment, inspection, or even due diligence.
Final Word
Finalisation of accounts may feel like a yearly checklist, but it’s actually the backbone of a company’s financial reporting. Done properly, it gives management a clear picture and also builds credibility with regulators, banks, and investors.
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