As the end of the financial year is approaching, there are certain procedures which need to be followed to finalise your accounts. These procedures are supplementary to the day-to-day bookkeeping process. It is important that these procedures are followed so that all the financial activity of the year is recorded prior to closing the accounts.

What are the procedures?

Bank Reconciliation

This is one of the most important procedures. Without a bank reconciliation, you cannot ensure that all the financial activities have been recorded and are in order. You must ensure your bank reconciliation is up to date and complete, preferably on a month by month basis.

Bank reconciliation helps to identify the reasons for the difference in the closing balance of your cashbook and bank statement and will assist in making the necessary adjustments for incorrect and/or missing entries.

Inventory

If you are maintaining inventory, you should perform a year-end stock count and valuation to align the inventory account to match with the items on hand. During the stock count, you must also identify slow-moving and obsolete inventory and make necessary adjustments in your accounts.

Cash count

A cash count refers to a physical count of the cash/petty cash with the records kept. It is important that a cash count is performed at year end, so that the adjustments for differences can be more accurately recorded as of the year end.

Debtors and Creditors

You must identify exactly how much your customers owe your business (Debtors) and how much your business owes suppliers and other parties (Creditors) at the end of the financial year. Checking the customers and suppliers accounts at least once a year is important. Generating an aged debtors and creditors report and checking the amounts in the report to look for unusual or odd balances can be a good way to start.

This is also the time to decide the debtor amounts to write off which you do not expect to recover for various reasons. These are called bad debts and are treated as an expense of the business.

Assets

Besides ensuring that all current years fixed asset purchases are recorded correctly, importance must also be given to identify the assets which are sold or disposed. A physical count of fixed assets should be compared with the fixed asset register. If an asset register is not maintained, a year-end register must be created.

Tax Clearance

As tax is an important part of your business, it is vital that your tax dues are recorded correctly in your accounts. Submitting a tax clearance form to would be the easiest way to get the most updated information about your tax dues. You should submit a MIRA 902 Tax Clearance Application form to the Maldives Inland Revenue Authority (MIRA) to get this information.

Other year-end adjustments

Additionally, there are certain expenses which may not be associated with a specific transaction. However, these year-end adjustment entries are passed to adhere to international financial reporting standards. Such adjustments are:

– Depreciation

– Amortisation

– Accruals and prepayments

– Tax expense

– Annual bonus