Finalisation of Books of Accounts

1. Purpose

To ensure that the annual financial statements prepared by BTA are:
  • Accurate and complete
  • Compliant with applicable laws and standards
  • Fully reconciled with external records

Key Reconciliations Covered:

  • GST Returns
  • TDS Statements
  • Bank Records
  • Loan Statements
This SOP provides a step-by-step structured process to review all areas of books before finalisation of the year-end Trial Balance.


2. Scope

This SOP applies to:
  • All clients where bookkeeping is handled by BTA
  • Engagements involving:
  • Financial Statement Preparation
  • Tax Computation
  • Audit Support

3. Roles & Responsibilities

Role
Responsibility
Preparer (Article/Junior)
Compile trial balance, perform reconciliations, post-closing entries, prepare schedules
Reviewer (Senior/Manager)
Verify all reconciliations, check statutory compliance, review analytical ratios
Partner
Conduct final analytical and legal review, interact with client, approve final financials


4. Base Inputs Required

Sr.
Document / Data
Source / Remarks
1
Latest trial balance (post bookkeeping)
From accounting software
2
Bank statements up to 31 March
For reconciliation & cut-off testing
3
GST returns (GSTR-1, 2B, 3B, 9/9C)
For reconciliation
4
TDS returns & Form 26AS
For TDS payable/receivable verification
5
Loan statements & interest certificates
For accrual verification
6
Fixed Asset Register
For depreciation & additions
7
Stock statement/physical verification
For closing inventory
8
Outstanding receivables & payables list
For provision / write-off analysis
9
Confirmation letters
From debtors, creditors, loans
10
Prior year audited financials
For opening balance match
11
Management representations
On major estimates & contingencies


5. Step-by-Step Finalisation Process

A. Preliminary Review – Completeness & Accuracy

Particulars
Verify that all months are closed and bookkeeping checklists are complete
Ensure no pending reconciliation in bank, GST, or TDS ledgers
Confirm that all entries carry detailed narrations and valid documentation
Review trial balance for suspense/temporary accounts and clear them
Compare current year and previous year ledger heads — identify new or missing heads


B. Verification of Key Ledgers & Statutory Compliances

Area
Detailed Checkpoints
Sales & Receipts
• Match book sales with GSTR-1 and 3B• Verify that for each customer receipt, TDS (if deducted by customer) is recorded as TDS receivable and customer account closed• Confirm all credit notes and debit notes are properly accounted• Ensure export sales or SEZ supplies supported with LUT/shipping bills
Purchases & Expenses
• Match purchase ledgers with GSTR-2B• Confirm no ITC claimed on blocked items under section 17(5)• Verify that all supplier invoices are recorded and paid, or shown as outstanding• Ensure TDS has been deducted on all applicable payments (rent, professional, contractor, interest, etc.)• Verify RCM liability on GST has been identified, paid through cash ledger, and ITC taken (if eligible)
TDS (Payable & Receivable)
• Cross-verify total TDS deducted during the year with Form 26Q/24Q filings• Ensure TDS payable as on 31 March is deposited within due date u/s 43B• Reconcile TDS receivable ledger with Form 26AS; take follow-up for missing credits
GST Compliances
• Verify outward supply per books vs GSTR-1 & 3B• Verify ITC claimed matches GSTR-2B; no ineligible credits taken• Confirm that RCM payments (legal, freight, security, etc.) are properly booked• Verify annual return (GSTR-9) balances tie to books
Bank Accounts
• Perform reconciliation as on 31 March• Check post-year transactions for cut-off errors• Verify unpresented cheques and deposits in transit
Loans & Borrowings
• Match balances with lender statements• Record accrued interest for March (if not yet posted)• Verify that loan classification (secured/unsecured) is proper
Fixed Assets
• Match additions/disposals with invoices• Compute depreciation as per IT Act/Companies Act• Ensure GST ITC claimed on eligible assets only
Inventory / Stock
• Verify closing stock quantity and valuation method (FIFO, weighted avg)• Ensure closing stock matches with GST and management records
Pre-Paid & Outstanding Expenses
• Amortise prepaid portion for current year• Record year-end outstanding provisions (audit fees, salary, interest, electricity, etc.)
Capital & Partner Accounts
• Verify capital introduction, drawings, profit sharing, and interest entries• Confirm partner remuneration within limits prescribed under IT Act
Other Income & Accruals
• Record interest income accrued but not received• Verify dividend, rent, or commission income with documentary support
Contingent Liabilities / Commitments
• Review legal cases, guarantees, and pending assessments for disclosure in notes


C. Adjusting Entries to be Passed

Adjustments
Depreciation on fixed assets
Provision for outstanding expenses and accrued income
Write-off or provision for doubtful debts
Adjustment for prepaid expenses and advances
Year-end stock entry
RCM liability if unpaid or unbooked earlier
Deferred revenue or income in advance
Foreign exchange revaluation
Closing of GST payable/receivable control accounts
Adjustment of TDS receivable/payable after reconciliation


D. Analytical & Variance Review

Particulars
Compare current year vs. previous year for each major expense and income head
Investigate abnormal variations (>20%)
Calculate ratios: Gross Profit %, Net Profit %, Current Ratio, Debtors Turnover, etc.
Document reasons for major deviations


E. Statutory & Tax Review

Particulars
Check disallowances under section 40(a)(ia), 43B, and 37(1)
Verify payment dates of statutory dues (GST, PF, ESIC, PT, TDS)
Confirm tax audit applicability under section 44AB
Review presumptive/profit applicability under sections 44AD/ADA/AE
Review depreciation schedule for WDV continuity as per Income Tax Act
Confirm correct treatment of personal or non-business expenses
Validate interest computations for partner remuneration or loans


F. Financial Statement Preparation

Particulars
Prepare schedules for every Balance Sheet and P&L item
Verify opening balances match with last year’s audited figures
Prepare draft financial statements with comparative column
Include Notes to Accounts, including accounting policies and statutory disclosures


G. Final Review & Client Discussion

Particulars
Partner to review all reconciliation statements and review notes
Discuss significant adjustments, provisions, or deviations with client management
Obtain written management representation letter covering confirmations, contingencies, and statutory compliance
Freeze the trial balance after approval


H. Documentation & Archival

Folder
Contents
01 – Trial Balance
Final TB with adjustments
02 – Reconciliations
Bank, GST, TDS, Loans, Stock
03 – Adjustments
Journal vouchers, depreciation, provisions
04 – Confirmations
Debtors, creditors, loans
05 – Financial Statements
P&L, Balance Sheet, Schedules, Notes
06 – Review Notes & Sign-off
Reviewer checklist, Partner remarks


6. Year-End Completion Checklist

Sr.
Area
Key Checks Before Closure
1
Bank Reconciliation
Balance confirmed, no pending entries, cut-off verified
2
Sales & Receipts
GSTR-1 matched, TDS on receipts recorded, advances adjusted
3
Purchases & Expenses
GSTR-2B matched, TDS deducted, RCM paid, prepaid split done
4
GST Control
Books match with GSTR-3B & 9, ineligible ITC reversed
5
TDS Control
Payable & receivable matched with returns & 26AS
6
Loans
Closing balance & interest reconciled
7
Fixed Assets
Additions, disposals, depreciation checked
8
Inventory
Physical vs. book match, valuation verified
9
Prepaid/Outstanding
Registers updated, year-end entries passed
10
Capital/Partner Accounts
Interest & drawings reconciled
11
Income & Expenses
Analytical review completed
12
Statutory Payments
All taxes paid before due dates
13
Final Financials
Draft reviewed, approved, and archived


7. Maker–Checker Sign-off Flow

Stage
Activity
Preparer
Completes reconciliation, schedules, and draft adjustments
Reviewer
Verifies all control points, fills review checklist, documents remarks
Partner
Final analytical and statutory review, client discussion, sign-off
Task Closure
Final trial balance locked, reviewed files uploaded, status marked “Year-End Finalised”