The financial year 2079-80 is almost over. Before closing their books and start for next financial year, accountants should take care of multiple items in their financials. It covers dealing with adjustment entries, changes in software, computation and payment Advance Tax, VAT, TDS and many other items.
Year-end closing is often the busiest time for any accountant. This period is so hectic that most of the professional work overtime to finish pending accounting works and verifications. Khata Business Academy has brought you 20 major tasks that an accountant need to perform during the year-end closing time. Kindly use it as a checklist to improve your efficiency and productivity.
1. Verify all documents
The first task accountants should perform during the year-end closing is to verify each and every invoice and supporting document. This includes thoroughly checking all sale bills, purchase invoices, expense vouchers, salary sheets, and proof of receipts and payments. After verifying them, it is important to securely store these documents in a safe place.
These documents are frequently used during audits and are subject to scrutiny by the Income Tax office. Therefore, it is necessary to retain them for a minimum of 6 years from the year-end date. This ensures that you have the necessary records available in case of any future audits or inquiries.
2. Changes to be made on software
3. Verification of Closing Stocks as on 31.03.2080:Â
4. Collecting Bank Statements:Â
Accountants should collect bank statements from all the banks where the company holds accounts, either by visiting the branches or downloading them through net banking. These statements will be compared with the bank book or bank ledger in the software. Any differences will be reported in a bank reconciliation statement, which helps identify discrepancies and ensures accurate financial records.
5. Collecting Loan confirmation letter:Â
If a business has taken any type of loan, such as an overdraft or long-term loan, accountants should collect all loan account details from the bank, including a bank confirmation letter. The bank confirmation letter is a document provided by the bank that confirms the loan amount, interest rate, bank charges paid, and any accrued interest, if applicable. It serves as official verification of the loan terms and helps ensure accurate recording of the loan in the company’s financial records.
6. Taking balance confirmations of required parties:Â
Accountants should collect balance confirmation letters from debtors and creditors with transactions over 1 lakh in fiscal year 2079-80. These letters are important for preparing Annexure 13 in the Income Tax Return filing. Accuracy in Annexure 13 reduces the risk of scrutiny by the Income Tax Office.
7. Reconcile Inter-branch balances:Â
As part of preparing the final accounts, it is necessary for the company to reconcile the balances between different branches and subsidiary companies, just like confirming balances with external parties. This reconciliation helps ensure accuracy and consistency in the financial statements.
8. Download all VAT Returns:Â
Accountants are advised to download all VAT Returns related to the financial year 2079-80. These returns should be compared with the accounting books and records. Any discrepancies in the total sales or purchases between the VAT Returns and accounting books need to be investigated. If any omissions are found in either of these two sources, a VAT Reconciliation Statement must be prepared during the audit and income tax filing process.
9. Reverse VAT Payments:
In certain cases, businesses need to make reverse VAT payments, such as for construction through non-VAT suppliers or when importing services. These payments should be made and adjusted in subsequent periods to comply with Income Tax Rules.
10. Deduct TDS on Service Purchases:Â
Accountants should be aware that TDS (Tax Deducted at Source) needs to be deducted for various expenses, including rent, transportation, professional services, and more. To ensure compliance, accountants should consult with auditors or business consultants to identify any expenses on which TDS has not been deducted by the business and the reason thereof. Seeking professional advice can help ensure accurate TDS deductions and adherence to tax regulations.
11. SST & TDS on Salary:
A complete salary sheet must be prepared for all employees, including part-time and full-time workers. SST and TDS on Salary should be deducted, deposited, and filed monthly. If not done, they must be completed at year-end. The income tax slab rate of FY 2079-80 should be used as the Budget 2080-81 changes apply from Shrawan onwards.
12. File ETDS Returns:
To complete the TDS process, accountants must not only deduct TDS and make payments but also file ETDS returns on the PAN of the party through the IRD website. Filing ETDS returns is crucial for claiming expenses and ensuring compliance with tax regulations. Failure to file ETDS returns can result in the business being unable to claim expenses on these items.
13. Deduct TDS on Audit Fee:Â
It has been observed that companies often fail to deduct TDS on year-end provisions for expenses such as Audit Fees. It is crucial for companies to ensure that proper TDS has been deducted and paid in these cases.
14. Payment of Advance Tax:
To avoid fines and penalties, every business is required to pay at least 90% of the estimated advance tax before the end of Ashad (mid-July). Accountants should ensure that the Estimated Income for the year has been accurately calculated and the corresponding advance tax has been paid prior to the year-end. This proactive approach helps businesses meet their tax obligations and avoid any potential financial consequences.
15. Record Foreign Exchange Fluctuations Properly:Â
Accountants working with companies involved in importing goods and services should exercise caution when dealing with foreign exchange differences. It is advisable to consult with auditors or consultants before making any entries related to foreign exchange fluctuations.
16. Recording Depreciation on Fixed Assets:Â
Accountants need to ensure the preparation of a Fixed Assets register, including accurate asset categorization and put-to-use period. These details are essential for calculating depreciation according to the Income Tax Act 2058. Care should be taken during the categorization process as it can significantly impact the company’s Balance Sheet and Profit & Loss Statement. Accurate categorization of assets ensures proper financial reporting and compliance with applicable regulations.
17. Compulsory E-billing compliance:Â
Accountants should be aware that the government has made E-billing mandatory for businesses with an annual turnover exceeding 10 crores (5 crores for certain businesses like ISP) starting from the Financial Year 2079-80. If the business’s turnover has crossed this threshold, accountants should promptly notify management and reach out to the Inland Revenue Department to obtain approval for the installation of the required E-Billing Software.
18. Prepaid Expenses:
Accountants must allocate certain expenses, such as insurance, which span multiple reporting periods into two parts. One portion is attributed to the current year, while the remaining amount is designated for the upcoming year. The portion allocated to the upcoming year is recorded as an asset in the books and referred to as pre-paid expenses. This practice ensures accurate financial reporting by properly recognizing expenses that have been paid in advance for future periods.
19. Prepare VAT Reconciliation:
If any invoice or document is discovered to be missing after the VAT Return filing of Ashad 2080, the VAT on such documents should be included in the VAT return through other adjustments. Additionally, a VAT Reconciliation Statement should be prepared, which provides details of the missing invoices and the reasons for their omission. These documents are particularly valuable during audits and income tax filing, as they help ensure accurate reporting and compliance with tax regulations.
20. End with Tax Clearance Certificate:
What are the Financial Reports to be prepared during Year End:
Every business needs to prepare following financial reports during the year end closure after adjustment entries. Accountants need to be prepared with the skills and knowledge to compile and interpret these reports.
Balance Sheet: It shows assets, liabilities and shareholder’s capital as on closing date, i.e. Ashad end.
How can accountants learn Practical Accounting, Business Taxation and Financial Reporting skills?
Invest some time and resources on building a better accounting career ahead. Best of luck for FY 2080-81.
