Steps to be taken at the time of Finalization of books of accounts

Finalization of account means check and reconciled books of accounts is correct, perfect and accurate.

Normally, books of account finalize at the end of the year. But best practice is check and reconcile accounts periodically i.e. monthly or quarterly.

Steps to be taken at the time of Finalization of books of account

1. Opening balances are correctly posted as per last year audited balance sheet

2. Prepare a bank Reconciliation Statement

3. Reconcile the Sales , Purchase, Output tax and Input tax with GST Returns

4. Clear out Suspense Account, if exist.

5. No entry on National Holiday

6. Stocks are shown at Cost or NRV whichever is lower.

7. Extract the Customer and Vendor Ledger and send balance confirmation letter to them

8. Pass the Bad Debts Entries after discussion with Management.

9. Cash Expenses are with in limit and No Negative cash balance throughout the year.

10. All new asset purchase properly capitalized and respective depreciation entries passed as per WDV method

11. Interest Payable and receivable on loans and investment properly recorded

12. Make provision of outstanding and pre-paid expenses like Insurance Expenses are properly bifurcated into Prepaid and Salary for the month of March if paid in April are outstanding.

13. Audit Fees, Accounting Charges and other business related expenses entries properly passed

14. If personal expenses are debited to P&L Account, than at the time of calculation of profit for the purpose of tax that expenses should be add back to profit

15. Check Petty Cash Expenses.

16. Compare Expenses with Previous Year Expenses on the of turnover and if you find any major variation in any ledger than check again correctness and record the reason for variation

17. Confirm TDS on specify payments deducted and paid up to due date.

18. TDS Receivable should be match with 26AS

19. PF, ESI and other Statutory dues Properly recorded and Paid within Due Date.

20. Narration is specify with each entry on not.

21. Compare Gross Profit and Net Profit Ratio with last year, if you find major variation discuss with management

22. In case of Partnership Firm

*Interest on Capital as per Partnership dead

*Remuneration to Partners does not exceed the limit  as specify in Income tax act.

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The author can be however contacted for further clarification at 9654182791 or via mail at [email protected]

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