One of the biggest parts of a smooth and successful financial year-end is understanding it. We are going to dive right into what a financial year-end is and the importance of it.
A financial year, also known as a fiscal year, is the period used by governments for accounting and budget purposes. It is different from your normal year that begins on 1st January and ends on 31st December. A financial year is often very different to this. It also consists of a twelve-month period, except it generally runs anywhere in between February and March – although there are some exceptions.
What is important?
It forms the period over which a company is taxed. It also is a method of measuring the profitability over a set period and thus provides the ability to compare to previous financial years.
What is involved?
The Annual Financial Statements (AFS) reports need to be prepared and extracted. Accountants assist in preparing the AFS of a business. In order to make sure that the figures in the reports are correct there are certain accounting procedures that need to be undertaken. These are mostly reconciliations and certain year-end adjustments.
At the start of a new financial year, accounts will have a zero balance and the Balance Sheet account will all contain the carried forward figure (which includes the accumulated profits or losses) from the previous financial year.
How can an Accounting Software System help?
Having an accounting software system will mean that information from all the different areas of the business are captured on a real-time basis during the course of the financial year.
This is all because the system is fully integrated, all the information will automatically update all the necessary accounts so that the bulk of the information is already there to be extracted.
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Once the year-end process is complete and all adjusting entries have been processed, it is important to be able to “close off” the previous financial year. It is important to close off the prior in order to ensure that the accounting system continues to reflect the correct balances.
We hope this breakdown has given you some insight if you are new to financial year-end, that it helps you understand the importance of it, as well as making sure you are organised throughout the year. If you have any questions on how our accounting software can assist you during financial year-end, give us a call here: 0861 726 657.