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Learn How to Prepare Year-End Accounts

This page contains our free online course on preparing year-end accounts. It covers the basics of year-end accounting and adjustments, and financial statement preparation. 

The Course Covers:
 

  • The Fundamentals of Year-End Accounting

  • Compiling Year-End Accounts

  • A Period-End Closing Checklist 

  • Financial Year-End Essentials 

  • Ideal for Sole Traders and Ltd Companies

 

Course Modules:

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Disclaimer: You must seek the advice of an accounting and tax professional before filing company accounts and tax returns. This course is extensive but is not suitable for all businesses. Please seek the advice of a tax professional. 

Year-End Accounts Made Easy

Preparing year-end accounts

Part 1: An Introduction to Year-End Accounting

Module overview:

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  • Course Introduction 

  • What are Year-End Accounts?

  • Who compiles Year-End Accounts?

  • And more

Course Overview

This extensive course will teach you how to prepare year-end accounts from beginning to end. It is a step-by-step guide. Combined with my other detailed bookkeeping and accounting courses, you will create a solid foundation for bookkeeping, accounting, and finance. 

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The course includes:

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  • Bookkeeping to Trial Balance. The double-entry bookkeeping required to prepare accurate financial accounts, including a review of debits and credits and accounting software. 

  • Making Corrections. Common mistakes to look out for and how to fix them. 

  • Reconciliations. Accounts that need reconciling and how to reconcile them. 

  • Depreciation. Accounting for depreciation of fixed assets and the methods of depreciation. 

  • Accruals and Prepayments. Calculating accruals and prepayments and common accruals and prepayments. 

  • Stock Adjustments. Creating a stock account, including opening and closing balances. 

  • The Profit and Loss Account. Calculating the profit and loss equity account. 

  • Retained Earnings. Calculating retained earnings for the period. 

  • Year-End Journals. How and when to post journals and opening journals. 

  • Compiling a profit and loss statement (statement of comprehensive income). How to compile a profit and loss statement. 

  • Compiling a balance sheet (statement of financial position). How to compile a balance sheet. 

  • Tax Calculations and Returns. A brief review of what may be required from a tax perspective and records and calculations which should be kept. 

  • Course Ending. Miscellaneous items. 

What are year-end accounts?

Year-end accounts detail an entity's sales, expenses, profit (or loss), assets, liabilities, and equity for the financial year of an entity. They cover the period from the start of a financial year to the end. 

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Company year-end accounts usually cover a twelve month period, which is the company's financial year. For example, a company with the financial year of 31 March 20XX will have a financial year from 1 April 20XX to 31 March 20XX. 

Why are year-end accounts needed?

Tax authorities require year-end accounts. They are the primary source of tax calculation. 

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Year-end accounts are also crucial for financial planning and business management and are required by lenders. 

Who can compile year-end accounts?

Year-end accounts are usually compiled by an accountant, tax accountant, chartered accountant, or CPA. However, they can also be compiled by a bookkeeper, business owner, or in-house by a member of the accounting/finance department. 

Part 2: Bookkeeping to Trial Balance

Module overview:

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  • The What, Why, and How of Bookkeeping

  • Record-Keeping 

  • Double-Entry Bookkeeping

  • And more

Year End Accounts Course

The Bookkeeping

The first step is the bookkeeping, which is the most time-consuming aspect of preparing year-end accounts for most businesses. 

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It is advised that bookkeeping be done at least monthly. This helps to keep the accounts up to date, keeps the record-keeping manageable, and allows for the production of management accounts. 

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Some accountants rely on a bookkeeper to do this step. However, there are often areas of the bookkeeping that haven't been done, such as accounting for savings and loan accounts. 

What is bookkeeping?

Bookkeeping is the record keeping of an entity's financial transactions and documents. This includes recording an entity's sales, expenses, liabilities, equity and investments, and asset purchases. 

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To learn the basics of bookkeeping, take my Free Bookkeeping Course. 

What needs to be accounted for?

A complete bookkeeping record should include the accounting of the following:

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  • All sales invoices and credit notes

  • All purchase invoices and credit notes

  • All money in and out of the business bank accounts, including current and savings accounts

  • All money in and out of any cash accounts (petty cash)

  • All money in and out of company credit card accounts

  • All loan transactions, such as repayments and interest. This can include business loans and mortgages

  • Any business transactions showing in the owner's personal bank accounts

Should I use double-entry bookkeeping?

Is it a legal requirement? It depends on the country the business operates in - different tax authorities have different requirements. 

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Should you use double-entry bookkeeping? Yes. Double-entry is a very accurate and robust method of accounting. 

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To learn the basics of double-entry bookkeeping, take my Free Double-Entry Bookkeeping Course or The Ultimate Bookkeeping & Accounting Course. 

Should I use accounting software?

Bookkeeping software has many advantages. It will do the double-entry bookkeeping for you. It can also speed up the bookkeeping process by automating several aspects of accounting. Accounting software also offers useful financial reports at the click of a button. However, smaller businesses may not be able to justify the cost. 

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The most popular software packages are Sage, QuickBooks Online, and Xero. 

Correcting Year End Accounts

Part 3: Corrections

Module overview:

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  • Common Mistakes to Look Out for

  • Making Corrections

  • Fixing Accounting Errors 

  • And more

Review the Accounts

It's now time to start a series of corrections and adjustments. 

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You must review all account transactions, including reviewing the nominal activity on all sales, expense, asset, liability, and equity accounts. Why? We are looking for mistakes and things that need correcting. 

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Accounts often contain errors. To help you correct these, I've included a list of common accounting mistakes below.

Common Accounting Mistakes

Below is a list of common errors to look out for when preparing company accounts:

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  • Misallocated expenses. It is common for expenses to be misallocated. Net wage payments allocated to gross wage expense and software allocated to subscriptions are just a few common misallocations that will need correcting. 

  • Assets as expenses. Computer equipment, office furniture, and other assets can often be shown as expenses on the profit and loss statement rather than as asset additions on the balance sheet. This obviously needs correcting. 

  • Missing wages journals. The wages journals are often omitted. These will need adding. You may also find that pension, wages, and social security payments have also been posted to the wrong nominal accounts. I have a Free Wages Journals Course if you need help with payroll and wages journals. 

  • Personal transactions are showing in the accounts. Any transactions not wholly and exclusively for the business must be removed from the accounts. 

  • Tax payments are not showing. Tax payments are often misallocated. Fines and interest on late payments are frequently omitted. 

  • Drawings/dividends allocated as expenses. This is obviously not correct and needs modifying. 

  • Old debts are included in trade debtors' and creditors' balances. Generating an aged debtors and creditors report can highlight old customer and supplier debts. This usually means something needs correcting or debts need to be written off. 

What's the Best Way to Make Corrections?

It is best to draft and post a journal detailing all the corrections. This journal should be dated as the last day of the financial year and include detailed descriptions. 

Need help?

I offer an Accounting Mentor Program and Accounting Support By Email if you need assistance. 

Part 4: Reconciliations

Module overview:

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  • Reconciling Accounts

  • Which Accounts to Reconcile

  • Using Software

  • And more

What is a reconciliation?

An accounting reconciliation is a process of ensuring that what has been accounted for accurately reflects what has happened.

 

Reconciliations help to remove errors such as duplicates and identify missing transactions. 

How do you reconcile accounts?

Reconciliations are done by comparing the accounting data against a statement. They are easier with accounting software, as it usually has a reconciliation tool. 

Which accounts need reconciling?

When preparing company accounts, as many accounts need reconciling as possible. This includes:

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  • Checking/current and savings bank accounts 

  • Loans and mortgages 

  • Credit cards

  • Customer accounts

  • Supplier accounts

  • Tax accounts

Need help?

Bank Reconciliations

Take my Free Reconciliations Course. 

Depreciation.png

Part 5: Depreciation

Module overview:

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  • The What, Why, and How of Depreciation 

  • Depreciating Assets 

  • Depreciation Journal 

  • And more

Depreciation Basics

Most tangible assets will need depreciating. Common depreciated assets are computer and office equipment, machinery, furniture and fixtures, and motor vehicles. Stock and property are generally not depreciated. 

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There are two methods of depreciation: straight line and reducing balance. 

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You can learn the basics of these methods and depreciation in my free depreciation course. 

Depreciation Journal

Depreciation is posted on the balance sheet and the profit and loss statement.

 

Assets should be categorised and depreciated as a group. For example:

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Computer equipment depreciation of 500

Debit depreciation expense (P&L) 500

Credit computer equipment depreciation (balance sheet) 500​​

Depreciation Accounts & Examples

The balance should include the following accounts:

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Asset cost b/f (debit balance)

Asset accumulated depreciation (credit balance) 

Asset additions for the year (debit balance)

Asset depreciation for the year (credit balance)

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Asset cost b/f is the total of asset purchases made since the start of trading. 

Asset accumulated depreciation is the accumulation of asset depreciation since the start of trading. The asset cost b/f minus the asset accumulated depreciation totals the asset opening balance for the financial year. 

Asset additions for the year is the total cost of asset purchases within the financial year or reporting period. 

Asset depreciation for the year. Once it has been calculated, the depreciation for the year will be posted here. 

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Example: 

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Depreciation at 25% reducing balance. 

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Motor vehicles at cost b/f = 87,800

Most vehicles accumulated depreciation = 21,950

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So, the opening balance of the motor vehicle asset account is 65,850 (87,800 minus 21,950)

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Motor vehicle additions = 35,000

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The asset opening balance, plus additions, multiplied by 25%. Or... (65,850 + 35,000)*0.25

Calculated depreciation = 25,213

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The journal will be:

Debit depreciation expense 25,213 (P&L)

Credit motor vehicle depreciation 25,213 (BS)​

What Next?

If the accounting software doesn't move the asset depreciation charge for the period to accumulated depreciation account at the start of the next period, you may need to post a journal to do this. The journal will be dated as the first day in the next reporting period. 

Adjustments!

This is the first of many year-end adjustments. It's advised you keep a detailed record of all calculations before posting the adjustments using a journal. 

Year End Accounting Services

Part 6: Accruals & Prepayments

Module overview:

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  • Prepayment Basics 

  • Accrual Basics 

  • Journal Basics

  • And more

Bank Reconciliations

Coming soon...

Coming soon...

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