Closing procedure…

Let’s see in detail closure process for upcoming financial year end 2024-25.
Following step by step detailed guide will provide insight into and through understanding of the
closure process.

1) Accounts Payable (A/P)

i) Ensure that all the Capital and Operational Expenses are recorded as per the
invoices received.
ii) All Invoices pertaining to the advance payments made to the vendors are received
and recorded, If not follow up for the same.
iii) Withholding tax (TDS) has been deducted appropriately with appropriate rates at
the time of advance payment to the vendors.
iv) To release the payments due to the vendors.
v) To Remit the payments to the Related parties w.r.t. goods or services purchased
either in foreign currency or in functional currency, as the case may be, if due
vi) Ensure that MSME vendor’s payment is not overdue, as in Audit Report, details of
MSME vendors is a necessary disclosure.
vii) Reinstatement of vendor’s outstanding in foreign currency is necessary at the rate of
exchange available on the Reporting date.
viii) Prepare AP Aging as on the reporting date.
ix) Share the Balance Confirmation Letters to the vendors, in order to confirm or
reconcile the balances as on reporting date.

2) Accounts Receivables (A/R)

i) Ensure that all the Receivables invoices pertaining to the sale of goods or services
are generated, recorded and issued to the customers.
ii) If advances have been received from the customer, make sure invoices are
generated and issued for percentage of completed service or transfer of goods to
the customer or on satisfaction of performance obligation, as the case may be.
iii) Ensure that payments have been received against outstanding invoices and there
are no overdue payments from the customers.
iv) If payments are overdue from the customer, review the past credibility records of
the customer and conclude whether non-payment is due to unforeseen events or
due to customers mala fide intention.
v) To make provision for bad and doubtful debts as per the company policy.
vi) If there is any insignificant amount of balance in the customer ledger, either return
back the amount to the customer or write off the amount with authorization of
departmental head.
vii) Reinstatement of Customer’s outstanding balances in foreign currency is necessary
at the rate of exchange available on the Reporting date.
viii) Prepare AR Aging as on the reporting date and share it with sales representatives to
collect the amounts due or overdue
ix) Share the Balance Confirmation Letters to the customers, in order to confirm or
reconcile the balances as on reporting date.
3) Cash and Bank Balances
i) Ensure all bank & cash related entries have been recorded.
ii) Obtain a Bank Statement as on the reporting date and reconcile the balance with
the accounting records.
iii) Obtain Balance confirmation letter from bank as an evidence of outstanding bank
balance
iv) Obtain Balance confirmation letter from Cashier as an evidence of outstanding cash
balance

4) Fixed Assets
i) Fixed asset Register to be updated with FA purchases or disposed of along with
depreciation provided as per the Companies Act.
ii) Verification of all the fixed assets purchased documents with supporting
iii) Ensure that all the assets acquired during the accounting period have been recorded
in the books of accounts.
iv) Conduct Verification of Fixed Assets at the end of the reporting period.
v) Verify whether there is any change in the useful life of the assets due to factors
affecting the same like, obsolescence of the assets, change in use of the assets,
change in economic benefits obtained from the asset, or changes in technology,
economy or market etc.
vi) Verify whether any indicators of impairment exist, so that impairment testing can be
conducted(eg significant fall in market price of the assets than expected , increase in
the mkt rate of return which will affect the discounting factor etc)
vii) After verification of all the changes Calculate depreciation as per rate applicable
(existing or new). Recognize depreciation in Income statement and credit in
accumulated depreciation account
viii) If Carrying amount of asset is greater than the recoverable amount of the asset,
recognize the Impairment loss.
ix) Carrying amount of asset is Carrying amount less accumulated depreciation less
accumulated impairment losses.

5) Payroll processing
i) Ensure that all employees related expenses have been recorded
ii) EPF,PT,ESIC and other employee benefits have been computed as per governing
laws.

6) Revenue & Expenses

i) Ensure that all the expenses have been recorded under proper heads like, operating,
non-operating, Personnel costs, Finance costs, Depreciation, Amortisation,Taxes etc.
ii) Ensure that expenses are recorded Cost Centre wise, if applicable.
iii) Ensure invoices for fixed expenses have been received and recorded.
iv) The costs incurred in completing the amount of performance obligation are matched
with the sales revenue.
7) Journal entries for Accruals ,Provisions And Prepaid
i) Record the accruals for the goods or services have been received or supplied but not
paid, for eg. Electricity, telephone charges etc.
ii) Record the provisions for the present obligation arising from the past event, and it is
probable that there will be outflow of resources embodying economic benefits to
settle the obligation. It should be estimated reliably. Eg. Warranty provision,
onerous contracts or restructuring provisions.
iii) Where expenses incurred or income accrued for the future period, record
expenses/income incurred/accrued for the current period(in Income statement) and
balance to the advance expense /income (in Financial Statements)

8) Intercompany Reconciliations
i) Where transactions are with parent or subsidiary or associate, reconcile the
balances as on the reporting date.
ii) If there are sale, purchase transactions, ensure that all the transactions are duly
recorded and payments have been received or paid.
iii) Reconciliation items should be resolved duly.

9) Translation of Foreign currency

i) A foreign currency transaction should be recorded, on initial recognition in
functional currency, by applying the exchange rate between the reporting currency
and the foreign currency at the date of transaction to the foreign currency amount.
ii) Subsequently, foreign currency monetary amounts should be reported using the
closing rate.
iii) Non - monetary items carried at historical cost should be reported using the
exchange rate at the date of the transaction.
iv) Non - monetary items carried at fair value should be reported at the rate that
existed when the fair values were determined.
v) Creating foreign exchange translation reserve, difference between exchange rate on
transaction date and on translation date

10) Inventory Audit ,Valuation and WDV

i) Inventory audit should be conducted to reconcile physical inventory with the
inventory recorded in the books of accounts.
ii) Valuation of inventory at lower of Cost or NRV(IAS/IND AS 2).
iii) Provide for Written Down value, if necessary.

11) Verification of Tax Accounts

i) Verify all taxes-GST,TDS,TCS etc. have been appropriately recorded and all the
liabilities have been paid off.
ii) Ensure that, Provision for income taxes have been made and advance for income
taxes paid.

12) Review and Preparation of Financial Statements