Annual closing is the set of work associated with the closing of individual accounts used in accounting, performed by a qualified accountant. During the annual closure, the closing balance of assets, liabilities and capital at the balance sheet date of the accounting entity is established. The complete inventory thus carried out is essential for the preparation of the financial statements. At the balance sheet date, usually the last day of the calendar year, it is essential that the closing balances in the accounts show a true and fair view of the assets, resources and economic outturn.
During the closing of the accounts, all accounting events arising at the last day of the accounting period are accounted for and the profit or loss is calculated and recognised. Where a profit is made, income tax is subsequently determined, including the subsequent accounting for that tax. The final act is to close all the books of account.
Before the actual closure of the accounts, the following is checked:
- the posting of all accounting cases,
- the corresponding bank and cash balances,
- the entry in the accounts of all liabilities,
- the booking of all assets, stocks and receivables,
- accounting for all tax liabilities,
- accounting for all changes in share capital,
- accounting for the economic result,
- verification of the balance sheet of assets and liabilities.