WHAT IS A YEAR-END?
The year-end is the end of the financial year.
A financial year is any 12-month operating period, chosen by the organisation, starting in any month in the calendar year and ending 12 months later. Most organisations opt for the Calendar financial year, which runs from January to December as opposed to government year that runs from July to June.
WHY DO WE HAVE TO CLOSE THE BOOKS?
>To comply with legal requirements
>To enable the organisation to report to its stakeholders on their performance. To enable the management ,board, staff and volunteers to judge the financial position and viability of the organization.
>To enable an audit or independent examination to be performed
WHAT ARE THE PROCEDURES TO FOLLOW?
There are two parts to performing the year-end procedures:
First the books need to be closed and adjusted to reflect the exact financial position at the year-end.
Then, specific information has to be provided to the auditor or independent examiner to enable them to match the value on invoices to the value actually paid out and vice versa with money received. Hence evidence would need to be provided to support the accounting information in the cash book etc.
CLOSING THE BOOKS
First decide a cut-off point. This is a date when further invoice processing is stopped i.e. 2 or 3 weeks after the end of the financial year. Any invoices received after this date would be paid in the following financial year, similarly any income received should be lodged in the bank in the following financial year.
The Cash Book: This must be updated, ensuring that the payments and receipts are analysed and added up month by month.
Perform a bank reconciliation, highlighting all the unmatched items which will either be income lodged or cheques paid which haven t yet been updated by the
bank and hence do not appear on the bank statement.
Prepare a creditors list: This is a list people or organisations that we owe money to, at the end of the accounting period, but have not yet paid. These will be the
invoices received but have not yet paid.
Prepare an accruals schedule (list). This similar to the above, but where the creditors figures are usually known, the accruals are based on estimations, this represents expenditure we have incurred but for which we have not yet received a bill, such as electricity, gas and rates. These bills are received every three months,
so we have to make an allowance for these expenses by estimating a figure based on previous bills.
Prepare a debtors list: This is a list of people or organisations that owe us money at the end of the accounting period, but have not yet paid us. These might be people who came on a training course but have not yet paid for their places, or those who bought publications but have not yet paid.
Prepare a prepayment list: This is the exact opposite of an accrual in that it relates to the expenses or amounts that we have paid for but relate to a future period.
Common examples of these are insurance premiums and rent, which are usually paid for in advance of use.
OTHER INFORMATION REQUIRED BY THE INDEPENDENT EXAMINER OR AUDITOR
The Cash book and petty cash book Bank statements for the financial year being audited
All details of the bank reconciliations done during the year
Bank paying-in books, Cheque book stubs for the year
All invoices paid, in date order and documents to support payments that do not have an invoice Details of all the equipment purchased during the year i.e. fixed assets like
computers, office furniture and transport
All letters and cheque counterfoils relating to receipts received and receivable
All details of salary records
Minutes of the Annual General meeting and Management Committee meetings held during the year. Also names and addresses of members who held office during the year
Copies of the organisation s constitution and the previous year s accounts In addition to the above , you will need to
complete your annual return to the KRA, and another to Registrar of Companies if you are also registered as a limited company.
