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How to finalize balance sheet and Profit and Loss Accounts Practically of a Company in Tally/SAP/BUSY?

Following Steps should be followed:-

  1. Complete all routine entries like Purchase/Sales/Receipt/payment

 

  1. Complete book closure entries like
  • Write off of Prepaid
  • Provision for bad debts/Provision for expenses/
  • Accrued Income/Accrued expense

 

  1. Purchase/Sales/Input /Output figures shall match with VAT RETURN/ST RETURN/EXCISE RETURN.

 

  1. Ensure that GP Ratio is similar to previous period, if not there should be proper justification for the same

 

  1. Check points of expense disallowed and prepare Current tax and Deferred tax Computation and pass entry for the same.

Add : Expenses Disallowed

(a) Depreciation As Per Companies Act

(b) Any Expense on which TDS Not Deducted or deposited by 30 Sep.

(c) Any Cash Payment > 20,000/-

(d) Any Unascertained Provisions (Provision for Bad Debts)

(e) Any Personal Expenses

(f) Any Illegal Expenses

(g) Any Interest on Loan Not paid till Due Date of ITR (30 Sep.)

(h) Any Bonus Not paid till Due Date of ITR (30 Sep.)

(i) Any Tax Not Deposited till Due Date of ITR (like PF)

(j) Any Income Tax / Wealth Tax / Int. / Penalty Shown in P&L

 

 

  1. Prepare BRS (Bank Reconciliation Statement) for each bank account

 

  1. For major debtors/creditors ,ask for balance confirmation or ask for vendor statement and prepare vendor reconciliation

 

8 Do Debtor aging and creditor ageing, for long outstanding debtors show as bad debts or provision

 

9 Change Ledgers in Wrong Heads

  • Examples
  • Debtors having Credit Balance-Either pass entry for Sales/Income or transfer them into Advance from Customer
  • Similarly for Creditors having Debit Balance-Either pass entry for expense or transfer them into Advance to Supplier
  • Any Expense or Income showing Negative Balance- It means either entries or wrong or expense has been booked as Income or viceversa

 

10 Clear Suspense Account-find and put party name

 

11 Ensure that there is no negative balance of cash or stock

 

12 Pass Output Input Adjustment Entries for Vat/ Service tax/Excise etc and ensure it matches with returns

 

13 For returns not filed, make provision for interest/penalty for the same

 

14 Prepare Depreciation Chart as per Companies Act and Income Tax Act and pass entry for the same.

 

15 Check last year Profit and Loss and Balance Sheet and ensure that no major expense/income etc which appeared in previous period is missed. These should be similar to previous period or else there should be proper justification for the same.

 

 In Addition,we should also so Ledger Scrutiny as explained in next page

  1. Accounts and Finance
  2. Step 4 Balance Sheet Finalization Procedure
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About the Author

CA Maninder Singh's photo - Expert in Practical Accounts, Taxation and Efiling
CA Maninder Singh
CA Maninder Singh is a Chartered Accountant for the past 6 years. He provides courses for Practical Accounts, Taxation and Efiling at teachoo.com .
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