Year-End Closing of Accounting Books 

Year-End Closing of Accounting Books 

The financial year has ended and it's time to start the books fresh. Closing the books is an essential task for every business owner because it helps gauge the business's overall performance, highlights balances that will carry forward to the next year, removes inconsistencies from the books, and creates an outline for the next year's financial reports.

Here's the year-end guide to close your books in ERPXpand.

⦁ Review your Receivables and Payables

⦁ Review your Stock Received But Not Billed Account

⦁ Review your Asset Received But Not Billed Account

⦁ Reconcile your Accounts

⦁ Post a Period Closing Voucher

⦁ Set your new Fiscal Year as default

Review your Receivables and Payables 

Verify the list of orders against which invoices are yet to be made, check the list of outstanding invoices, and ensure to remunerate them, this will give you a better idea of what you owe and own. Check for the oldest unpaid invoices present, it may cause a hidden uncertainty in your books. Once done, send out outstanding reports against your clients to ensure the balances are accurate.

Review your Stock Received But Not Billed Account

When a purchase order is raised, no entries are posted to the General Ledger because no asset or liability has been created yet.

Upon receiving the items/stocks, the purchase order is converted into a Delivery Note. When the Delivery Note is submitted:

- The Stock Ledger is debited (increased)

- The "Stock Received But Not Billed" account is credited

This is because the supplier invoice has not been received yet.

When the supplier invoice is received, the Delivery Note is converted into a Purchase Invoice. This triggers the following postings:

- The Supplier Account is credited

- Any taxes on the purchase are debited

- The "Stock Received But Not Billed" account is debited to render that account balance zero

At month-end or year-end closing, the "Stock Received But Not Billed" account balance should be zero and not appear in the Trial Balance. If there is a balance:

1. Print the Stock Received But Not Billed ledger

2. Match debits against credits to identify transactions without a supplier invoice posting

3. Post the supplier invoice to correct the error and bring the account balance to zero

Review your Asset Received But Not Billed Account.

When you raised a purchase order fixed asset, no entries are posted in the general ledger as no asset or liability has been created. When the fixed asset are received, the purchase order is converted into a Delivery Note. When the delivery note is submitted, the Asset is debited/increased and an adjustment account called Asset Received But Not Billed is credited. This is so because the supplier invoice has not yet been received. When the supplier invoice is received the delivery note is converted to a purchase invoice. This will credit the supplier account, debit any taxes on the purchase and also debit the Asset Received But Not Billed to render that account zero. Hence every month-end-closing or year-end-closing your Asset Received But Not Billed must be zero not shown in your trial balance.

If there is a balance, print that ledger and match the debit against the credit till you see the transaction without a supplier invoice posting. Post the supplier invoice to correct and make the account balance zero.

Verify the list of orders against which invoices are yet to be made, check the list of outstanding



Reconcile your accounts 

⦁ Bank Reconciliation:

The process to match your transactions entered in ERPXpand from your bank statement also helps to record other charges incurred not recorded in the books.

Use the Update Bank Transaction Dates tool to match balances as per your bank statement.

> Home > Accounting > Banking and Payments > Update Bank Transaction Date

⦁ Invoice Reconciliation:

The process to allocate your Payment Entries against your Customers and Suppliers to get accurate Receivables and Payables.

Use the Payment Reconciliation tool to link your unallocated payments against pending invoices.

> Home > Accounting > Banking and Payments > Match Payments with Invoices

⦁ Stock Reconciliation: This helps you keep the physical stock and book stock in sync.

Use Stock Reconciliation to keep your stock up-to-date.

> Home > Stock > Tools > Stock Reconciliation

⦁ Stock Closing Entry

Closing Stock Balance Creation: After the financial year has ended, and the necessary audits have been completed for that year (in this example, the financial year 2022-2023), you should create the Closing Stock Balance. This should be done for the specific end date of the financial year 2022-2023.

Annual Closing Stock Balance: It is essential to create the closing stock balance every year after the closing of the financial year. This ensures that the Opening Stock values are updated and accurate for each reporting period.

To audit your books, your accountant will need the following reports:

⦁ Financial Statements: Balance Sheet, Profit and Loss Statement, and Cash Flow Statement.

⦁ Bank Statements and Loans.

⦁ Asset Depreciation and Balances.

Post a Period Closing Voucher 

This step will ensure all your incomes and expenses are balanced and you start your books from zero for the next financial year.

It resets your income and expense accounts and posts it to the account selected while creating it as seen in the General Ledger below (transferred to Reserves and Surplus).

Once your accountant has made all the adjustment entries to balance your accounts, you can freeze your accounts.

To freeze, you can:

⦁ Go to Account Settings, and enter the date till when you want to freeze your account.

⦁ Create an Accounting Period to avoid the creation of any financial transactions for the period.

This configuration will stop the submission of Purchase Invoices for the period mentioned.

Change Fiscal Year 

ERPXpand creates Fiscal Year at the end of every financial year.

Home > Accounting > Setup > Fiscal Year

We hope this will help you in closing your books and give you a fresh start for the new financial year.