Closing accounting books and reporting

5/10/2021

To close accounting books and prepare financial statements to be effective, the accountants should take the following steps:

Step 1: Arrange accounting documents

Arrange and manage the accounting voucher system in chronological order. Vouchers should be archived monthly and quarterly for easy control.

Step 2: Record in detail the economic transactions that arise

On the basis of the sorted and classified documents, the accountant will open the book and record the arising economic transactions such as: entry note, issue note, receipt note, payment note, credit note, debit note...

To be able to comply with the provisions of the law on tax accounting, accountants need to gradually improve the reasonable, valid and legal documents in the accounting process.

When closing and preparing financial statements, it should be noted:

Step 3: Allocation of transactions by month

Every month, based on the previous entries, the accountants conduct the allocation entries, such as:

  • Allocate upfront costs
  • Calculate depreciation of fixed assets
  • Tool allocation

Step 4: Overall review each group of assets

After accounting, recording and completing documents and vouchers, the accountant will review the arising economic transactions.

For an accurate review, a commonly used method is asset grouping. This method helps accounts be carefully reviewed and easy to detect deviation.

The review works are as follows:

  • Inventory check: Is inventory checking negative? If yes, find out the reasons for negative, find out the cause and methods to correct and adjust the negative stock. Run COGS according to the registered inventory method.
  • Review of receivable and payable debts: First of all, for accounts receivable and payable, it is necessary to compare with customers and suppliers by year-end reconciliation minutes. After that, the creditors and the debtor can be checked to properly reflect the arising economic transaction and the tax risks that may be encountered.
  • Investment review: Check investment records, analyze the nature and accounting methods to see if they are correct, need to check to make sure the investment recognition is correct. Documents for comparison are meeting minutes, documents, financial statements provided by the investee.
  • Review of prepaid expenses: Check the value and time of allocation, request to track each item and reflect according to the principle of matching.
  • Review of fixed assets: Calculate historical cost, usage time, recognition principle and depreciation allocation in accordance with Circular 45/2013 / TT-BTC, Circular 28/2017 / TT-BTC. Especially note the case that the principle of deducting VAT and expenses is not deductible when calculating CIT for passenger cars with 9 seats or less.
  • Revenue and cost of sale review: Check whether the revenue of each product has reflected according to market value, fluctuation of selling price and the cause of fluctuation. Check whether the cost of each product code, each contract has been reflected in the policy. Whether the gross profit has been calculated correctly.
  • Management expense review: Check whether records, cost-to-revenue ratio are within an acceptable and reasonable level, whether accounts have been correctly reflected, revenue and expenses recognition are consistent with accounting principles or not?
  • Finally, checking the error correction entries, the adjustment entries at the beginning of the year, and the adjustment entries when changing the accounting regime.

Step 5: Make general entries and transfer entries

After reviewing all detailed transactions and completed steps in step 4 above, accountants carry out the recordings of revenue, expense, profit and loss carry-over, ensuring all accounts from account 5xx until account 9xx does not have a closing balance.

Step 6: Prepare financial statements

  • Prepare financial statements according to the current accounting regime
  • Finalization of CIT, PIT
  • After completing the financial statements and declaration, they need to be exported to excel to save on the computer. Files submitted to the tax authority is an XML file that follows the most recent report submission process.