Year-end accounting records are no walk in the park, we know that. But with the right tools, they can be tackled with a bit more ease. Let's tidy up this topic.

Closing the year-end balance requires the verification of certain accounting records called balance adjustments. These represent accounting records that allow evaluating balance sheet balances according to the principle of economic competence, whereby costs and revenues must be accounted for when they accrue, regardless of the actual financial manifestation.

What are these accounting records?

Accruals and Deferrals

Accruals are future income or expense portions measuring already accrued revenues or costs not yet recognized because their financial manifestation will occur in future periods.
Deferrals are portions of cost or revenue not yet earned but have already had their financial manifestation.

With So Smart, calculating accruals and deferrals is simple and precise. Just fill in the start and end dates. The calculation extends beyond the data required for year-end closing on December 31. The data is also available monthly in simulated accounting.

To record them in accounting on December 31, the only action to take is the "Accruals/Deferrals Closure," which involves verification on December 31 and the simultaneous carryover on January 1.

Invoices to be Issued and Received

Invoices to be issued represent credits that the company has with its customers for goods sold or services rendered but not yet invoiced. Invoices to be received, on the other hand, represent amounts the company owes to its suppliers for goods or services received but not yet invoiced.

The calculation of invoices to be issued is based on shipped but not yet invoiced sales orders and loaded but not yet invoiced purchase orders. They can be automatically calculated for registration on December 31, and, not only that, when the actual invoice is recorded, the automatic closing offset of invoices to be issued/received will be recorded, avoiding the recognition of duplicate revenues or costs.

Depreciation

Depreciation is an accounting process aimed at spreading the cost of assets with multi-year utility over the course of their useful life. This accounting practice is essential to accurately reflect the consumption of the asset's value over time and allocate part of its cost to each accounting period in which it is used to generate income.

With So Smart and its fully integrated fixed assets accounting with general accounting, you can calculate depreciation at the end of the year with the "Calculate Depreciation" action. Once confirmed, the balances will flow into both general accounting and the fixed assets register.

Inventory

Inventory refers to the total value of items or goods that a company still has in stock at the end of an accounting or fiscal period. These goods have not yet been sold or used in production and physically remain present in the company's inventory. Inventory is a key element in company financial statements and is important for determining income and financial position.

Inventory can include finished products, semi-finished goods, or raw materials.

There are different methods for valuing inventory, including the weighted average cost method, the FIFO (First In, First Out) method, and the LIFO (Last In, First Out) method.

Inventory is a crucial element in the financial and accounting management of companies, as it directly influences the determination of income and the assessment of the financial position.

With So Smart, you can calculate the end-of-year inventory value based on actual costs incurred and recorded inventory movements, without any extra-system calculations.