FINALIZATION - TAXOVERSE

FINALIZATION OF BOOKS

The most crucial function of financial accounting is to ascertain the financial position of the business and the profitability of the business. The trading and profit and loss account show the net profit and net loss of the business, while the balance sheet shows the financial position of the business.

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CONCEPT OF FINALIZATION OF ACCOUNTS

Finalization of the accounts means the preparation of the profitability statement and the positional statement of the business. Hence, accounts that are required to be prepared are as follows:

Trading Account
Profit and Loss Account
Balance Sheet

Finalization of accounts signifies that the books of accounts are checked and reconciled and are correct, perfect, and exact.

The books of account are normally closed at the end of the year. However, it’s best to test and reconcile accounts on an everyday basis, like monthly or quarterly.

HOW TO FINALIZE AN ACCOUNT

STEP 1: Make a recording

Check for transactions that haven’t yet been entered into Reach Accountant Software.
If you have got any unpunched bills or invoices, confirm they’re entered into the software.

STEP 2: Reconcile your finances

Print and reconcile the Bank Book with the bank statements.
Prepare an announcement of Bank Reconciliation.
Reconcile cash balances and check funds, Imprest, and open claims.
Make a physical stock check using the Physical Stock Report (Compilation Stock Report).
Reconcile the sales figures with any VAT, Service Tax, or Excise Returns you will have previously filed.

STEP 3: Make any necessary adjustments before closing the books.

Pass journal entries to correct missing stock after you’ve completed the reconciliation.
Add in any missing bank and cash transactions.
Bad debts should be corrected or written off.
Depreciation entries should be passed.
To shift current earnings to retained earnings a/c, make a journal entry. This enables you to start the New Year with a fresh profit counter.

STEP 4: Compile the ultimate Accounts

Print the Daybook, Ledgers, balance, Profit and Loss Account, and Balance Sheets after you’ve finished the previous procedures.
Extracting them into excel or pdf and saving them to your Google Drive or Dropbox may be a better idea.

STEP 5: Submit your financial statements for audit

You can easily let your auditor access your account by creating a user account.
To make his job easier, an auditor can use audit tools and pass adjustment entries.

STEP 6: In-Reach Accountant, create a replacement fiscal year.

Create a replacement of twelve months in Reach if possible.
If your accounts are closed, ensure you select to automatically carry over your balances.
Creating a brand new year without importing the opening balances if the finalization isn’t yet complete for the year.

FOLLOWING ITEMS WILL DISPLAY IN TRADING ACCOUNT

Opening Stock: In the context of a business, the opening stock refers to the finished goods only. Trial Balance should be used to determine the amount of opening stock.
Purchases: The total amount of money spent over the course of the year. Cash is also used to make purchases. As a buy on credit Purchase deductions, like purchase returns, are possible.

Direct Expenses: these are all the costs incurred from the time the goods are purchased until they are in excellent working order. This comprises inbound freight, salaries, and other costs.

Gross Profit: If the credit side of the trading account is more than the debit side, gross profit is generated.
Sales: In general business operations, sales refer to any transactions where money or value is exchanged for the ownership of a good or entitlement to a service. In an accounting context, sales refers to a company’s revenue earned from the sales of products or services (net sales).
Closing Stock: Closing Stock is an amount of unsold stock lying in your business on a given date. In simple words, it’s the inventory which is still in your business waiting to be sold for a given period. The closing stock can be in various forms such as raw materials, in-process goods (WIP) or finished goods.

FOLLOWING ITEMS WILL DISPLAY IN BALANCE SHEET

1. LIABILITY

Capital: This refers to the initial investment made by the business’s owner or owners.This donation could be made at the commencement of the business or later on to meet the needs for finances for expansion, diversification, and other purposes. Owners and businesses are separate entities under the business entity idea, hence any capital investment by owners is a liability.

Reserves and Surplus: The company is a going concern, which means it will continue to make a profit or loss year after year. The accumulation of these profit or loss figures (known as surpluses) will continue to increase or decrease the equity of the owners. Profits and losses from non-corporate forms of enterprise are added to the capital A/c.

Bills Payable: It is fairly uncommon for suppliers to refuse to provide clean credit. They provide items in exchange for a promissory note, which must be signed as a promise to pay later or on a specific date. These are referred to as payable bills or payable notes.

Bank Overdrafts: Banks may provide funds such as overdrafts, which allow businesses to write checks up to a particular maximum. These checks will be honoured by the bank, and the money will be recovered from the firm. This is a temporary commitment.

ASSETS

Fixed Assets: These are the assets or facilities that the company owns for a longer period of time. The primary goal of these resources is to use them for future revenues rather than to buy and sell them. The benefits of using these assets are spread out over a long period of time.Some fixed assets are tangible, such as buildings, machinery, vehicles, computers, and so on, while others are intangible, such as patents, trademarks, and goodwill. Depreciation is the term used to describe the wear and tear on fixed assets. Fixed assets appear on the balance sheet.

Investments: These are money that is temporarily invested outside of the business. When a company has excess money that isn’t needed right away, it’s a good idea to invest it outside of the company, such as in mutual funds or fixed deposits. The goal is to make a respectable return on this money rather than letting it sit idle. These are assets that are listed on the balance sheet individually. There are two types of investments: current investments and non-current investments. Investments that are barred from being sold or disposed of beyond the present term are known as on-current investments.

Cash on Hand: This is the amount of cash held by the company on the balance sheet date. This money could be kept in a variety of offices, places, or areas where the business is conducted. Cash is physically counted and compared to the book balance at all locations. If there are any discrepancies, they are corrected.

Cash at the Bank: Bank transactions are extremely common. Funds maintained as bank balances are also classified as current assets because they will be used to pay suppliers. The bank balance in the books of accounts is always reconciled with the bank statement balance, the reasons for discrepancies are discovered, and the relevant entries are passed.

FAQs FOR FINALIZATION OF ACCOUNTS

Q1. How do you finalize a book of accounts?

Steps in the Process of Finalization of Accounts

Trading Concerns.
Manufacturing and Trading Concerns.
Manufacturing Account.
Trading Account.
Profit and Loss Account.
Balance Sheet.

Q2. What is finalizing in writing?

Verb (used with object), finalized, finalising. to put into final form; complete all the details of. verb (used without object), finalized, finalizing. to complete an agreement; conclude negotiations: We should finalize by the end of the week.

Q3. How do you Finalise a conclusion?

Conclude by linking the last paragraph to the first, perhaps by reiterating a word or phrase you used at the beginning. Conclude with a sentence composed mainly of one-syllable words. Simple language can help create an effect of understated drama.

Q4. What is finalization of a project?

This is the stage where all deliverables are finalized and formally transferred, and all documentation is signed off, approved, and archived. The project closure process ensures that: All work has been completed according to the project plan and scope. All project management processes have been executed.