Year end closing operations | Double-entry accounting

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End of the Year operations include all checking, assessment and time related operation that needs to be at the end of the year before preparing the year's financial statements.

Technical aspects and new year

With Banana Accounting each accounting year has its own separate file; technically there is no concept of accounting closure:

  • When a New Year starts a new file is created with the Create New Year command.
  • You can keep working on both the New Year's file and the previous year file at the same time. Once the closing operations are complete, you can update the opening balances of the New Year's file.

Fiscal aspects

Before closing the accounting, is is necessary to proceed with a series of operations that have fiscal implications. The inventory account needs to be adapted, transactions for depreciation need to be entered, the transitional income and liabilities, the VAT declaration needs to be completed, establish how and unto which accounts the profit or loss has to be attributed and there are many other operations of verification and checking.

From the program's point of view, there is no difference whether the profit is high or low. There are a lot of implications from a fiscal point of view however. These aspects need to be verified with your own tax advisor or accountant. It can be very useful, especially when you manage an accounting for the first the time and before you proceed with the closing of the books, to consult a specialist in order to understand what is required. Accountants are usually very busy at the beginning of the year and during the period preceding the deadline for the tax declaration. It may therefore prove useful to meet with your accountant or send him the accounting file - a few months before the closing of the books, so that you can inform yourself on how to proceed.

Check accounting command

Banana Accounting allows you to quickly record and also to leave pending operations without interrupting the continuation of the work.

The Actions > Check Accounting command performs a whole series of checks, as if you were re-entering the data from the beginning, and when errors or differences are detected, these are signaled.

It is advisable to use the Check Accounting command with a certain regularity and every time there are differences or error signals, important changes (opening exchange rates, VAT codes) and especially before closing the accounting.

Checks and verifications

Verification of the opening balances

  • In the Accounts table, in the Opening and Balance columns, in the row "Difference must be zero" no amount must be shown, otherwise there is an error that must be found and corrected in order for the opening balances to be correct.
    Note: In the Transactions view, in the Debit and Credit columns, it is normal have amounts.
  • Make sure the prior year's receivable and payable transactions are closed.
  • Verify that the opening balances are consistent with the previous year's ending balances already reviewed and reported to the Tax Office.
  • For multi-currency accounting see the appropriate page Opening Balances in Multi-Currency Accounting.

Verification of accounting balances

The first thing to do is undoubtedly to make sure that the account balances match. The cash account balance must match the actual cash balance. The balance of bank accounts, credit cards, loans, or credit balances must match the balance on the bank statement. The same applies to all other accounts with which you have deferrals, VAT, suppliers, etc.

If there is a difference, you must find out why and correct accordingly either the opening balance or the transactions.

Differences in the Transactions table

In the Transactions table (Info window at the bottom), check that no differences are reported. In addition to the features present in the Check accounting command,  in the Transactions table of Banana Accounting Plus there is also the Balance column, which allows you to detect all the rows where differences are created. Just a quick scrolling of the column is enough to immediately identify the accounting differences and correct them, without carrying on the errors in the New Year.

Differences between bank balances of bank statements and accounting balances (CheckBalance feature)

This operation is fundamental for the veracity of the accounting. We advise you to carry on the verification of the balances, #CheckBalance, not only at the end of the accounting period, but periodically at the end of each month, to avoid that any mismatched balances are carried on from month to month.
More information on the verification of balance at the Checkbalance page.

Multi-currency accounting

If you are using multi-currency accounting you must also set up closing exchange rates and record unrealized exchange gains and losses. For this please refer to this page:

Closing accounting entries

At the end of the year, before moving into the New Year, there are closing accounting operations to be made. These are adjustment entries, value adjustments and adjustments relating to personnel contributions. Here are the main ones:

Import the movements of the cash account in the main accounting file
This operation is only made in case the cash account is kept separately on a separate file from the accounting.
After the import has taken place, verify that the balance of the cash account in the main accounting file corresponds to the balance of the cash file. This verification can also be done with the Check Balance function, described in the previous paragraph.

Import the payroll transactions in the accounting file
This operation is only made if the payroll is managed with a specific accounting software that allows you to import the transactions into the Banana Accounting Plus file.
The import is carried out from the menu Actions > Import into accounting > Import transactions with column header.
Remember to insert the entry of the 13th month of December quota, if this is not created by the payroll software.

Delcredere account adjustment
Companies that record on accrual method, if they foresee potential losses, must settle the Delcredere account.

At 31.12 it is necessary to record the depreciation of movable and immovable assets and to evaluate the possible accelerated depreciation for those assets subject to rapid obsolescence.
You can use our application Fixed Assets Register that automatically creates the depreciation transaction and you can resume them in the accounting file.

Inventory adjustment
Our Inventory application allows you to have accurate counts both by pieces and by value, helping you to determine your inventory settlement faster.

Assess customers and suppliers open invoices at 31.12
To make the process easier, with the feature of open invoices by customer and open invoices by supplier you can quickly detect the values as of 31.12.

Private use
If the company uses a company car, you need to enter the transaction for its private use with the appropriate VAT code.

Closure and VAT declaration
Before submitting the VAT declaration, we recommend the following verification operations:

  • Use the Check accounting command. In case of errors and differences, find the messages in the Information window (bottom of the screen), in the Messages section.
  • Verify that there are no differences in the Balance column of the Transactions table.
  • Check if your bank balances correspond to those shown in the bank statements.
  • Verify that, after having reversed the balance in the VAT due account (VAT to be paid to the FTA), the automatic VAT account is zero. The VAT due account must show the amount to be paid or the credit amount to be received.
  • Before submitting the last VAT return, take a look at the VAT statements for the previous quarters, to check that the amounts paid to the FTA still match the amounts displayed.
  • Use the VAT Report command to view the various reports and create a PDF printout for archiving the data. In the event of tax audits they will be useful.

Settle the account for the "Tax at the source" 
After calculating and recording December salaries, proceed to enter the transaction for the "Tax at the source" settlement, based on the statement sent to the "Tax at the source office".

Refunds for upper management
If provided, include the amount allowed by the tax authorities as a lump sum refund in the December salary.

Private account settlement
Verify the balance of the private account. If there is a debit/credit relationship between the business and the owner(s) (or close persons), record the income or expense interests as provided in the loan agreement or according to applicable tax guidelines.

Taxes and fees account settlement
Verify that down payments made during the year relate to the current year. Tax payments that relate to previous years should first be recorded to close the corresponding amounts put aside, and then (if there are any exceeding amounts), they should recorded using the "Direct Taxes" account (assets). If the balance of the provisions is insufficient or excessive, the difference must be recorded as an extraordinary expense/revenue or relating to previous periods.

Recording of AVS/AD/IPG/AD final balances

  • During the year, in the AVS contributions account, the down payments made to the Cantonal AVS Compensation Fund (Debit) and the amounts withheld from employees' salaries (Credit) are usually recorded.
  • If during the year the family allowances paid to the employees have been recorded in a dedicated account, for example in the "Family allowances contributions" account, in order to reconcile the accounting with the AVS closing statement and to record the relevant settlement, the balance of this account can be transferred to the AVS/AD contributions account.

Recording of Lainf, Lainf complementary, LPP pension final balances
With the recording of the December salaries and the payment of the thirteenth month's salaries, you must print the salary list with the indication of all gross salaries. You must report the total AVS gross amount to the employee's insurance companies, who will determine any adjustments to be paid.

Sending the file to your accountant

If the closures and/or audits are carried out by your fiduciary, just send him/her the accounting file created with Banana Accounting Plus by email or save the data on a USB key.

  • If your trustee has Banana Accounting, it is sufficient to send him/her the .ac2 file by email or via USB key. You can also save your file and the digital documents in a shared folder with your trustee on Dropbox. You will no longer have to bring heavy paperwork folders to him/her.  Also, the trustee will work faster without having to go through the paper documentation.
  • If you your trustee doesn't have Banana Accounting, you can create a PDF file of the accounting data, through the menu File menu > Create PDF dossier and send him/her the file by email. The trustee will indicate to you all the modifications and additions to be recorded in order to correctly close the accounting period.
    Alternatively, your trustee can open your accounting file using the Free version of Banana Accounting Plus, by downloading it from our Download page. If your file has over 70 transactions, he/she won't be able to add entries or make modifications, but he/she will still be able to see all the data, get accounts detailed cards just by double-clicking on any account number, etc. and advise you on possible corrections and/or improvements.

Blocking transactions

Once the closing and verification entries have been made, we recommend proceeding locking your accounting transactions.

Year end printouts

For the accounting year-end printouts you can find the information by clicking on the following links:

PDF Dossier

The Create PDF Dossier command allows you to have all the documents of the entire accounting period (account cards, journal, VAT statements, monthly, quarterly and annual reports...) in a single PDF file.

You can archive the accounting data, saving the accounting file and the PDF printouts. Eventually, make backup copies on an external disk drive.

Documentation for the audit process

On the Preparing the documentation for the Audit page, we have posted a series of notes and suggestions on documentation to send to the auditor. A complete documentation is a good basis for making the auditor's job more efficient and faster.

Profit/Loss allocation

In Banana Accounting Plus, the distribution of the profit or loss takes place automatically at the start of the  New Year. For further information consult the page Create New Year.

Changes after closing

Normally, once the closing has been done, there shouldn't be any modifications recorded. However, sometimes there may be a need to adjust the accounting, as in the following cases:

  • Unrecorded exchange rate differences at closing
  • Unrecorded missing transactions
  • Errors in the transactions.
    • Make the necessary adjustments in the following year, clearly describing the issue in a document that you will need to attach to the rectification transactions. Of course, depending on the situation, there may be tax consequences, so it is best to seek advice from your accountant.
    • In multi-currency accounting, for the issue of unrecorded exchange rate differences, follow the information on the page Differences in the opening balances.
  • If the legal framework allows you to make changes to a closed year:
    • Proceed with caution, limiting yourself only to truly necessary modifications.
    • Double-check the accounting and perform all necessary checks to ensure that the changes do not create problems.
    • After the modifications, open the file for the following year and update the initial balances using the Update opening balances command.
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