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Depending on the legal format of the organisation, net profit (or loss) arising from the Income Statement is then transferred to the Capital or Retained Earnings (for limited companies). Once, the adjustment entries are passed, all revenue accounts are closed for the accounting year and the balances transferred to the Income Statement (Statement of Profit or Loss). provision for directors’ remuneration especially if based on financial performance.creation of any allowances/reserves for provisions and other liabilities.profit or loss on sale/disposal of non-current assets.capitalization of expenditure to be allocated to the non-current assets.
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Normally, these adjustment entries will include the entries for: These journal entries are passed to make the Financial Statements more meaningful, relevant and also to adhere to the accounting concepts of prudence and accrual. Any other number will require further investigation and necessitate adjustment either for accrual or prepayment. For example, a rent account which is paid every month should have 12 transactions for an accounting year. All accounts with unusual or odd balances should be investigated.ĭoing a thorough scrutiny of ledger accounts of the nominal ledger (or general ledger)Īn experienced accountant will be able to scrutinize the ledger accounts and find unusual patterns or inconsistencies. Reconciling customers’ and suppliers’ accounts at least once a year is vital. These will include bank reconciliations, reconciliation of suppliers’ accounts with the statements sent by them and sending out statements of accounts to customers. Also a very important accounting reconciliation would be that of Non-current Assets (also called Fixed Assets) with the records kept.
#Accounting process and procedures template verification
These will include checking the cash/petty cash with the cash book, physical verification of the inventory (of raw material, components, finished goods, goods for resale etc.) with the records kept. They should however be adapted to suit the needs of the organization. Ideally, these year-end accounting procedures should include the following.
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To make sure that all the items of income and expenditure are recorded on accrual basis.End year accounting procedure help to detect errors in the books of accounting kept throughout the year.
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