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Background - Year-End Closing

Background  — Fri 4 Mar 2022

What is a year-end closing?

A year-end closing is partly an audit and partly some finalizing tasks.

When do you do the year-end closing?

Year-end closing is the moment when you decide to close a fiscal year for good. This moment must therefore be after the fiscal year you want to close. In theory, it could be January 1 of the new year. Yet it often doesn't work that way. In practice, there are often still some things that will not occur until some time in January, and sometimes even February, that relate to the previous fiscal year.

So you often don't start the year-end closing process until late February, or even later, when everything from the previous fiscal year has been processed. You also often do it before May, because this is the time when the Belastingdienst would like to hear about your previous calendar year.

But as an entrepreneur, you can sometimes submit your figures to the Belastingdienst much later than May. For example, if you have a bookkeeper or accountant who has requested a postponement for you. The reason they can do this is because they help more entrepreneurs, and it would be very difficult to help them all at the same time. Also, they would not have any work to do for the rest of the year, which is why they may spread out the work. They can apply to the Belastingdienst for postponement for some or all of their clients.

What do you do during a year-end closing?

But what exactly do you do at that moment? Closing out a year consists of a list of tasks that you take care of. You do this once a year so that the fiscal year can be permanently wrapped up and closed. That closing actually means that you no longer change anything that happened in that year. From sales invoices to memorandum bookings and everything in between. In software, you can often control this easily by setting a financial lock date.

After the year-end closing, you can be sure that the figures no longer change, and so you can draw up the (closing) balance sheet. You can then use that balance sheet to prepare the annual statement. Lastly, you use the annual statement to fill out (or have filled out) your tax declaration.

The list of tasks

Although it may vary for each company and situation, the list of tasks during the year-end closing process roughly boils down to the following:

  • You check whether everything has been entered; from invoices to transactions and monthly debits.
  • You check whether your results report has been categorized clearly and whether the amounts are logical.
  • You check whether your balance report has been categorized clearly and whether the amounts are logical.
  • You distribute the outstanding result of the fiscal year among your business assets as desired.

Although the year-end closing has been done when you have reached this point, you will often do some more work and finish up to the annual statement:

  • You prepare a closing balance sheet for the fiscal year, listing everything from that year.
  • You create an annual statement based on that closing balance sheet.
  • And then you don't change another thing, which is made easy by a financial lock date.

Closing out the year with Daxto

Of course, this has all been made easy in Daxto. You can read here how a year-end closing in Daxto works.