The annual financial statement work is one of the most important requirements for analysing the development of a company. Therefore, before auditing the annual accounts, you should check the preparatory work. After all, preparation is fifty percent of the rent! Examples include the inventory, opening balance, balance confirmations, buildings/operating equipment and numerous other pieces of information. Therefore, one should think about it in advance so that the year-end closing can start with a good feeling.
Inventory as part of the year-end closing process
the inventory is one of the most important tasks and must be carried out and documented in good time. It requires the recording of equipment, inventories and spare parts. It is important to realise that an increase in inventories increases profit and a decrease in inventories reduces profit.
Documentation
It is therefore necessary to document all transactions of the year concerning fixed assets and stocks. Not only capital assets such as computers, machines, furniture and company vehicles must be documented, but also all merchandise in the warehouse and in production. In addition, a chronological compilation of all account statements must be prepared.
The logbook and overdue receivables deserve special attention during the audit as part of the annual financial statements. If bad debts are expected, they are recognised as a value adjustment.
Required lists for the annual accounts
In addition to the inventory, there are a number of other required lists and information that must be compiled and submitted with the annual financial statements. This includes information and lists about:
- unfinished and finished but not yet invoiced services
- sold or scrapped items from the depreciation schedule
- planned investments for the next 3 years
- Company-owned vehicles with number plates and the employees who use them
- Pending legal proceedings
- expected warranty-related sales or Services
- planned maintenance work in the next 3 months
- Commission or bonus obligations that will be settled in the following year
- Holidays not taken by employees at the end of the year
- dubious requirements
- bad debts
- outstanding bills
- Guarantees or other security measures
- Residual terms of commercial loans
- Listing of extraordinary business transactions that occurred during the financial year
- Original donation receipts
- Land register extracts for the property items
- Opening balance sheet values
It is particularly important to clarify crucial questions during the preparation period for the upcoming annual financial statements:
- Are the annual financial statements of the previous year available with all calculation documents?
- What should you prepare? A commercial balance sheet with a reconciliation statement or a tax balance sheet separate from the commercial balance sheet?
- What needs to be considered in the context of additional supplementary regulations for medium-sized or large corporations?
- Is the preparation of notes and a management report required?
- Does the annual result have to be shown either high or low?
Balance confirmations for the annual financial statements
Also an issue for the annual financial statements: Have been recognised for all receivables that exceed a certain threshold, Balance confirmations obtained? Do individual receivables have to be value-adjusted or, in extreme cases, is there a risk of total loss of the receivable?
Subsequent acquisition costs
When subsequent acquisition costs arise, it must be examined whether they are maintenance costs that reduce profits or subsequent acquisition costs that can be capitalised.
Merge information
Once you have collected and checked all records, lists and documents, you reconcile the information. This includes, for example, bank statements, the cash book and receipts. The accounting documents are compared with the outstanding receivables and liabilities. It must also be determined whether payments have actually been received from the respective customers for the registered receivables. The accounting records must be compared with the Cash book and the bank documents. The values recorded can be used to calculate the expected claim from the tax authorities, which must be offset against the advance tax payments made. Provisions must be recognised for any tax liability that may arise. During the preparatory work, not only should the receipts be checked, but any discrepancies and anomalies should also be noted.
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