He balance sheet it is the process that consists in canceling the accounts of results (composed of the accounts of income, expenses, costs of sale and production costs) and transfer these figures to the accounts of balance respective (assets, liabilities and equity). This closure allows to know the economic result of the period and quantify the earnings waves losses .
The result of the closing of the results accounts must be included in the account of heritage . This means that if the results are positive (profits), the equity account increases, while if the results are negative (losses), the account decreases.
To cancel or close the income statements, it is necessary to perform settings (depreciation of fixed assets, amortization of intangible assets, etc.) and reconciliations (from bank accounts).
In summary, the accounting closing implies, as a first step, the regularization of the expense and income accounts to obtain the result of the exercise . This lets you know how much you have earned or lost in the period. Then you must regularize the equity accounts (if it increased or decreased according to the gains or losses) and, finally, close all accounts with balance so that it is equal to zero.
It is possible that various problems with the accounting closing from mistakes in the movement records. Among the most common are annotations with wrong values, annotations in erroneous accounts (record expenses such as income or vice versa) and undocumented operations (such as a purchase without an invoice).
Practical guide for carrying out the accounting closing
1) Take stock to check the amounts and balances at the end of the accounting year, which is usually December 31, which returns if the accounting is it square or not. After this first step, if any error It is necessary to resolve it before continuing. When computer programs are used, it should be verified that the mismatches are real and not, due to technical problems;
2) Review one by one all records from the ledger to ensure that there are no accounting failures, such as having forgotten to open an amortization account, having entered some value incorrectly or that the balances do not match;
3) The adjustment of the accounts that can modify the result of the benefit accountant. The accounts to be analyzed are: inventories, fixed assets, provisions for expenses and risks, impairment of the value of assets, adjustments due to accrual, operations that have been attributed to Net Equity, amortization;
4) Having completed step 3, it is already possible to know the result before taxes, that is, the subtraction of accounting expenses from accounting income. But to find the result fiscal It is necessary to make certain adjustments established by the Corporate Tax Law (this tax is calculated by multiplying the tax rate by the benefit of the year).
We are now in terms to close the year; In other words, the four steps described above allow you to regularize and close the current year, and open a new accounting year. It is very important to have a backup copy of all the information, whether it is used in computer or paper media.
While there is a large number of tools Information technology specially designed to assist accountants in the realization of the closing of the financial year, as in the past there were no alternatives to paper, a good management of spreadsheet applications allows automating the activity without the need to acquire a specific program. However, one of the risks of making our own tables is that we can ignore some fundamental element for accounting, and generate errors that come to light in the long term.