Year-End Accounting Checklist for Businesses

The year-end accounting process is a critical period for businesses, as it involves closing the books, preparing financial statements, and ensuring compliance with regulatory requirements. For multinational corporations (MNCs) with subsidiaries in India, the year-end accounting process can be complex and challenging, given the need to navigate multiple accounting standards, regulatory requirements, and tax laws.

 

In this article, we provide a comprehensive year-end accounting checklist for businesses, highlighting key tasks, deadlines, and considerations for MNCs with subsidiaries in India.

 

Pre-Year-End Planning (October-December)

 

Before the year-end accounting process begins, businesses must engage in pre-year-end planning to ensure a smooth and efficient close. This critical phase sets the stage for a successful year-end accounting process, enabling businesses to identify and address potential issues, ensure compliance with regulatory requirements, and make informed decisions about their financial operations.

 

Reviewing Accounting Policies and Procedures

 

The first step in pre-year-end planning is to review accounting policies and procedures to ensure compliance with Indian Accounting Standards (Ind AS) and regulatory requirements. This involves a thorough examination of the organization’s accounting framework, including accounting policies, procedures, and controls.

 

During this review, businesses should focus on the following key areas:

 

1. Accounting policies: Review and update accounting policies to ensure they are aligned with Ind AS and regulatory requirements.
2. Accounting procedures: Review and update accounting procedures to ensure they are efficient, effective, and compliant with regulatory requirements.
3. Accounting controls: Review and update accounting controls to ensure they are adequate and effective in preventing errors, irregularities, and misstatements.

 

Identifying and Addressing Accounting Issues and Discrepancies

 

The next step in pre-year-end planning is to identify and address any accounting issues or discrepancies that may impact the financial statements. This involves a thorough review of the organization’s financial transactions, accounts, and records to identify any errors, irregularities, or misstatements.

 

Businesses should focus on the following key areas:

 

1. Financial transactions: Review all financial transactions, including journal entries, to ensure they are accurate, complete, and authorized.
2. Accounts and records: Review all accounts and records, including ledgers, journals, and financial statements, to ensure they are accurate, complete, and up-to-date.
3. Accounting estimates and judgments: Review all accounting estimates and judgments, including depreciation, amortization, and impairment, to ensure they are reasonable and supportable.

 

Coordinating with Auditors and Tax Consultants

 

The third step in pre-year-end planning is to coordinate with auditors and tax consultants to ensure a smooth audit and tax filing process. This involves communicating with auditors and tax consultants to understand their requirements, timelines, and expectations.

 

During this coordination, businesses should focus on the following key areas:

 

1. Audit requirements: Understand the audit requirements, including the scope, timeline, and deliverables.
2. Tax filing requirements: Understand the tax filing requirements, including the deadlines, forms, and supporting documentation.
3. Communication: Establish open and transparent communication with auditors and tax consultants to ensure a smooth and efficient process.

 

Reviewing and Updating the Accounting Calendar

 

The final step in pre-year-end planning is to review and update the accounting calendar to ensure all deadlines are met. This involves reviewing the accounting calendar to identify all critical deadlines, including financial statement filing deadlines, tax filing deadlines, and audit deadlines.

 

During this review, businesses should focus on the following key areas:

 

1. Financial statement filing deadlines: Ensure all financial statements, including the balance sheet, income statement, and cash flow statement, are filed on time with the Ministry of Corporate Affairs (MCA) and other regulatory authorities.
2. Tax filing deadlines: Ensure all tax returns, including the corporate tax return, Goods and Services Tax (GST) returns, and tax deducted at source (TDS) returns, are filed on time with the Income Tax Department and the Goods and Services Tax Network (GSTN).
3. Audit deadlines: Ensure all audit-related deliverables, including audit schedules, audit programs, and audit reports, are completed on time and submitted to the auditors and regulatory authorities.

 

Additionally, businesses with export-oriented units or special economic zone (SEZ) units must also ensure compliance with the following deadlines:

 

1. Filing of export-import declarations and shipping bills with the Directorate General of Foreign Trade (DGFT) and the Customs Department.
2. Submission of returns and reports to the SEZ authorities and the DGFT.
3. Compliance with the Foreign Exchange Management Act (FEMA) regulations and filing of returns with the Reserve Bank of India (RBI).

 

Financial Statement Preparation (January-February)

 

The preparation of financial statements is a critical component of the year-end accounting process. This phase requires meticulous attention to detail, a thorough understanding of Indian Accounting Standards (Ind AS) and regulatory requirements, and a commitment to accuracy and transparency. In this section, we will outline the key tasks involved in preparing financial statements, highlighting the importance of each step in ensuring the accuracy, completeness, and reliability of the financial statements.

 

Preparing the Balance Sheet, Income Statement, and Cash Flow Statement

The first step in preparing financial statements is to prepare the balance sheet, income statement, and cash flow statement in accordance with Ind AS and regulatory requirements. This involves:

 

1. Preparing the balance sheet, which provides a snapshot of the company’s financial position at the end of the reporting period.
2. Preparing the income statement, which provides a summary of the company’s revenues and expenses over the reporting period.
3. Preparing the cash flow statement, which provides a summary of the company’s cash inflows and outflows over the reporting period.

 

Ensuring Accurate and Complete Disclosure

 

The second step in preparing financial statements is to ensure accurate and complete disclosure of all financial information, including related-party transactions, commitments, and contingencies. This involves:

 

1. Identifying and disclosing all related-party transactions, including transactions with subsidiaries, associates, and joint ventures.
2. Identifying and disclosing all commitments, including operating lease commitments, purchase commitments, and capital commitments.
3. Identifying and disclosing all contingencies, including litigation, guarantees, and warranties.

Reviewing and Reconciling All Accounts

 

The third step in preparing financial statements is to review and reconcile all accounts, including bank statements, to ensure accuracy and completeness. This involves:

 

1. Reviewing all bank statements to ensure that they are accurate and complete.
2. Reconciling all bank statements to the general ledger to ensure that they are properly accounted for.
3. Reviewing and reconciling all other accounts, including accounts payable, accounts receivable, and inventory.

Preparing and Reviewing Supporting Schedules and Documentation

 

The final step in preparing financial statements is to prepare and review all supporting schedules and documentation, including depreciation schedules, amortization schedules, and investment schedules. This involves:

 

Depreciation Schedules:

 

1. Fixed Asset Register (FAR): A detailed schedule of all fixed assets, including their cost, depreciation, and net book value.
2. Depreciation Schedule: A schedule showing the depreciation expense for each asset, including the method of depreciation, useful life, and residual value.
3. Asset Disposal Schedule: A schedule showing all assets disposed of during the year, including their original cost, accumulated depreciation, and gain or loss on disposal.

 

Amortization Schedules:

 

1. Intangible Asset Register (IAR): A detailed schedule of all intangible assets, including their cost, amortization, and net book value.
2. Amortization Schedule: A schedule showing the amortization expense for each intangible asset, including the method of amortization, useful life, and residual value.
3. Intangible Asset Impairment Schedule: A schedule showing all intangible assets impaired during the year, including their original cost, accumulated amortization, and impairment loss.

 

Investment Schedules:

 

1. Investment Register: A detailed schedule of all investments, including their cost, fair value, and dividend income.
2. Investment Income Schedule: A schedule showing all investment income earned during the year, including dividend income, interest income, and rental income.
3. Investment Impairment Schedule: A schedule showing all investments impaired during the year, including their original cost, accumulated impairment, and impairment loss.

 

By preparing and reviewing these supporting schedules and documentation, businesses can ensure that their financial statements are accurate, complete, and reliable.

 

Tax Compliance (January-March)

Tax compliance is a critical component of the year-end accounting process, and MNCs with subsidiaries in India must ensure compliance with all tax laws and regulations. The Indian tax landscape is complex, with multiple taxes, including corporate tax, Goods and Services Tax (GST), and withholding tax. In this section, we will outline the key tasks involved in ensuring tax compliance, highlighting the importance of each step in ensuring accuracy, completeness, and reliability.

Preparing and Filing Tax Returns

The first step in ensuring tax compliance is to prepare and file all tax returns, including:

 

1. Corporate Tax Return (Form ITR-6): This return must be filed by all companies, including MNCs with subsidiaries in India, to report their income and claim deductions and credits.
2. Goods and Services Tax (GST) Returns: GST returns must be filed by all businesses, including MNCs with subsidiaries in India, to report their GST liability and claim input tax credits.
3. Withholding Tax Returns (Form 26Q): This return must be filed by all businesses, including MNCs with subsidiaries in India, to report their withholding tax liability and claim deductions and credits.

 

Ensuring Accurate and Complete Disclosure

 

The second step in ensuring tax compliance is to ensure accurate and complete disclosure of all tax-related information, including:

 

1. Income: All income earned by the business, including revenue from sales, services, and investments, must be accurately reported.
2. Deductions: All deductions claimed by the business, including depreciation, amortization, and interest expenses, must be accurately reported.
3. Credits: All credits claimed by the business, including input tax credits and foreign tax credits, must be accurately reported.

 

Reviewing and Reconciling Tax Accounts

 

The third step in ensuring tax compliance is to review and reconcile all tax accounts, including tax payable and tax receivable, to ensure accuracy and completeness. This involves:

 

1. Reviewing tax payable: All tax payable, including corporate tax, GST, and withholding tax, must be accurately reported and paid.
2. Reviewing tax receivable: All tax receivable, including input tax credits and refunds, must be accurately reported and claimed.

 

Preparing and Reviewing Supporting Tax Documentation

 

The final step in ensuring tax compliance is to prepare and review all supporting tax documentation, including:

 

1. Tax Invoices: All tax invoices, including GST invoices and withholding tax certificates, must be accurately prepared and maintained.
2. Tax Credit Certificates: All tax credit certificates, including input tax credit certificates and foreign tax credit certificates, must be accurately prepared and maintained.
3. Tax Audit Reports: All tax audit reports, including GST audit reports and corporate tax audit reports, must be accurately prepared and maintained.

Audit and Assurance (February-April)

The audit and assurance process is a critical component of the year-end accounting process, and MNCs with subsidiaries in India must ensure that their financial statements are audited in accordance with Indian auditing standards. The audit process provides stakeholders with assurance that the financial statements are accurate, complete, and reliable. In this section, we will outline the key tasks involved in the audit and assurance process, highlighting the importance of each step in ensuring a smooth and effective audit.

Coordinating with Auditors

The first step in the audit and assurance process is to coordinate with auditors to ensure a smooth audit process. This involves:

 

1. Identifying and selecting a suitable auditor: MNCs with subsidiaries in India must select an auditor who is registered with the Institute of Chartered Accountants of India (ICAI) and has experience in auditing financial statements in accordance with Indian auditing standards.
2. Coordinating audit timelines: The auditor and the company must coordinate audit timelines to ensure that the audit is completed in a timely manner.
3. Providing audit documentation: The company must provide the auditor with all necessary audit documentation, including financial statements, accounting records, and other relevant information.

 

Preparing and Reviewing Audit Documentation

 

The second step in the audit and assurance process is to prepare and review all audit documentation, including:

 

1. Audit schedules: The auditor will prepare audit schedules to test the accuracy and completeness of the financial statements.
2. Audit programs: The auditor will prepare audit programs to outline the procedures to be performed during the audit.
3. Audit reports: The auditor will prepare audit reports to communicate the results of the audit to stakeholders.

 

Ensuring Accurate and Complete Disclosure

 

The third step in the audit and assurance process is to ensure accurate and complete disclosure of all audit-related information, including:

 

1. Audit findings: The auditor will identify any material weaknesses or deficiencies in internal controls, as well as any errors or irregularities in the financial statements.
2. Audit recommendations: The auditor will provide recommendations for improving internal controls and financial reporting processes.
3. Audit opinions: The auditor will provide an opinion on the fairness and accuracy of the financial statements.

 

Reviewing and Responding to Audit Queries and Findings

 

The final step in the audit and assurance process is to review and respond to all audit queries and findings. This involves:

 

1. Reviewing audit queries: The company must review all audit queries and respond to them in a timely manner.
2. Addressing audit findings: The company must address all audit findings, including material weaknesses or deficiencies in internal controls, as well as any errors or irregularities in the financial statements.
3. Implementing audit recommendations: The company must implement all audit recommendations, including recommendations for improving internal controls and financial reporting processes.

 

Post-Year-End Activities (April-June)

After the year-end accounting process is complete, MNCs with subsidiaries in India must engage in post-year-end activities to ensure that all accounting and tax matters are properly concluded. This phase is critical in ensuring that all financial statements, tax returns, and other regulatory filings are accurate, complete, and compliant with Indian laws and regulations. In this section, we will outline the key tasks involved in post-year-end activities, highlighting the importance of each step in ensuring a smooth and efficient conclusion to the year-end accounting process.

Reviewing and Finalizing Financial Statements

The first step in post-year-end activities is to review and finalize all financial statements, including:

 

1. Balance Sheet: A statement of the company’s financial position at the end of the reporting period, including assets, liabilities, and equity.
2. Income Statement: A statement of the company’s revenues and expenses over the reporting period, including profit or loss.
3. Cash Flow Statement: A statement of the company’s cash inflows and outflows over the reporting period, including operating, investing, and financing activities.

Ensuring Accurate and Complete Disclosure

 

The second step in post-year-end activities is to ensure accurate and complete disclosure of all financial information, including:

 

1. Related-Party Transactions: All transactions with related parties, including subsidiaries, associates, and joint ventures, must be accurately disclosed.
2. Commitments and Contingencies: All commitments and contingencies, including operating lease commitments, purchase commitments, and litigation, must be accurately disclosed.

 

Reviewing and Reconciling Accounts

 

The third step in post-year-end activities is to review and reconcile all accounts, including bank statements, to ensure accuracy and completeness. This involves:

 

1. Reviewing Bank Statements: All bank statements must be reviewed to ensure that they are accurate and complete.
2. Reconciling Bank Statements: All bank statements must be reconciled to the general ledger to ensure that they are properly accounted for.

 

Preparing and Reviewing Supporting Documentation

 

The final step in post-year-end activities is to prepare and review all supporting documentation, including:

 

1. Depreciation Schedules: A schedule showing the depreciation expense for each asset, including the method of depreciation, useful life, and residual value.
2. Amortization Schedules: A schedule showing the amortization expense for each intangible asset, including the method of amortization, useful life, and residual value.
3. Investment Schedules: A schedule showing all investments, including their cost, fair value, and dividend income.

 

Ensuring Accounting Excellence: Your Trusted Partner

 

Managing the year-end accounting process for MNCs with subsidiaries in India requires a proactive and strategic approach. By understanding the common year-end accounting challenges, implementing effective solutions, and staying ahead of compliance deadlines, businesses can optimize their financial processes, minimize risks, and maximize efficiency. 

At Finsmart Accounting, our team of experts is dedicated to providing comprehensive guidance and support to help businesses navigate these complexities with ease. By partnering with us, you can

 

• Ensure timely compliance with all regulatory requirements
• Optimize your financial processes to maximize efficiency and minimize risks
• Maximize your business efficiency by leveraging our expertise and experience

 

Our services include:

• Expert guidance on year-end accounting and compliance deadlines
• Support in setting up and managing financial processes
• Ensuring compliance with all regulatory requirements
• Providing ongoing support and maintenance to ensure continued compliance

 

To learn more about how we can support your business, schedule a consultation with our team of experts today.

 

Book a consultation today: https://calendly.com/finsmart_accounting/30min