Year-end bookkeeping adjustments

Year-end adjustments place transactions and balances in the correct accounts under the applicable framework. Identify the facts behind each adjustment and keep its calculation and approval. Do not repeat last year's journals automatically where the underlying contracts, assets or business activity have changed.

Review accruals, prepayments, depreciation, stock, doubtful debts and director accounts as relevant. Separate accounting judgement from tax adjustments. The accountant should know about significant events after the year end that may affect the accounts or disclosures.

Start from reconciled records and a controlled cut-off

Complete the bank, customer, supplier and relevant control-account checks before preparing year-end adjustments. Confirm the reporting date and preserve the ledger version being reviewed. A journal should address a specific accounting issue, not compensate for unexplained bookkeeping differences. Keep a list of missing documents and unresolved balances so the accountant knows which figures remain provisional.

Collect transactions around the year end and determine which period they concern. Payment and invoice dates alone may not settle the treatment. Ask operational staff about work completed, goods received and services spanning periods. The applicable FRC framework informs recognition and measurement. ^[1] Confirm the company's reporting basis rather than applying a remembered rule without considering the actual contract or activity.

Support accruals, prepayments and revenue adjustments

For an accrual, identify the obligation or service received and the evidence supporting the estimate. For a prepayment, record the coverage period and calculation. Avoid carrying last year's amount forward automatically if the underlying contract or price changed. A clear schedule should show the source, method and expected later reversal or settlement so the next period is not distorted.

Review income recognised before billing and amounts billed before supply where relevant. Keep customer agreements, milestones and delivery evidence available. Do not use a year-end sales journal simply to achieve a target profit. The treatment should follow the facts and applicable policy, with material estimates and uncertainty explained to the directors reviewing the accounts.

Review assets, stock and recoverability

Reconcile the fixed asset register and assess additions, disposals, depreciation and significant changes in use. Check stock quantities and valuation evidence, including damaged or slow-moving items. Review old debts for realistic collection prospects. Use Keeping a fixed asset register and Stock records for a retail business for the underlying records so the adjustment schedule does not become a substitute for evidence of what the company owns or expects to recover.

Keep accounting adjustments separate from the tax computation. Depreciation, provisions and disallowed costs can have different tax treatment. Ask the accountant to explain the bridge rather than changing the books solely to match a desired tax deduction. The final accounts should represent the appropriate accounting position, with tax adjustments recorded in the relevant supporting calculation.

Make journals traceable and prevent duplicate effects

Record the journal date, accounts, amount, explanation and supporting schedule. Identify the preparer and approver. Check whether software has already posted a similar adjustment automatically. A depreciation charge or accrual entered twice can materially distort results while the ledger still balances. Where a journal reverses later, specify the timing and review the subsequent invoice or settlement.

Preserve the final approved journal list and post it consistently into the bookkeeping system where appropriate. Reconcile the final trial balance to the accounts. If adjustments remain only in the accountant's working papers, the next year's opening records may be wrong. Use Preparing records for your accountant to agree the handover and query process, including how final changes are communicated back to the company.

For Annual accounts preparation support, provide reconciliations, the draft adjustment schedule and the evidence behind material estimates. Ask for plain explanations of entries that significantly affect profit or net assets. Directors should understand unresolved judgements before approving the accounts. After filing, keep the final version and use recurring adjustments to improve monthly bookkeeping, so the next year does not require the same avoidable reconstruction of missing facts.

Control adjustments received after the books are closed

An accountant may send journals after the internal year-end close. Record which entries have been approved, who posts them and whether they affect the opening balances in the next reporting period. Keep a posting log linked to the supporting schedules so the same adjustment is not entered twice by different people.

After posting, reconcile the updated trial balance with the final accounts preparation figures. Check that reversals intended for the following period have been configured correctly. If an adjustment reveals an error in a recurring process, fix that process as well as the historical entry. This is particularly useful for payroll, depreciation and accruals, where an apparently small mismatch can recur every month if the underlying settings remain unchanged.

Illustrative scenario

A company pays an annual insurance premium shortly before year end. The accountant reviews the coverage period and records the appropriate treatment rather than assuming the entire payment belongs to that month. The supporting schedule explains the dates, amount and later release of any prepayment.

Preparation checklist

• List material balances requiring judgement or timing adjustments.
• Keep calculations linked to underlying evidence.
• Review subsequent invoices and significant later events.
• Approve journals and reconcile the final trial balance.