Year end – What is the year end?
Year end – also known as an accounting reference date – is the completion of an accounting period. At this time, businesses need to carry out specific procedures to close their books.
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In the UK, an accounting year does not necessarily correlate with the calendar year. For personal tax purposes the fiscal year is set by the government - starting April 6th and ending on April 5th the following calendar year. This tax year is the same for everyone in the UK, although the deadline for submitting Self Assessment tax returns might vary for certain individuals.
For limited companies, the financial year is set according to when the company was incorporated. In the UK, companies are given an accounting reference date (ARD) which refers to the last day in the month the company was incorporated. The ARD is the end of the financial year, and the new financial year starts the following day.
For example, if a company incorporated on 20th of May, their ARD would be the 31st of May. Their financial year would therefore run from June 1st – May 31st.
It is sometimes possible for a company to change their year end. This will normally affect their accounting period for corporation tax.
Year end adjustments
Year end adjustments, also know as end-of-year adjustments, are accounting procedures carried out at the end of the financial year. These procedures are key to creating a company’s financial statements such as balance sheets and profit and loss statements.
The number and nature of year-end adjustments depends on how thoroughly a company maintains its books throughout the accounting year. Common year-end adjustments may include:
- Depreciation and amortisation charges to fixed assets.
- Reclassification of entries. For example, a long-term debt may become due within a year so should be reclassified as a short-term debt.
- Adjustments based of external audits. For example, an auditor may find that a company has over or understated their inventory. The company should therefore correct the entry to reflect the accurate assessment.
- Accrual of unrealised expenses and revenues.
Year end in Debitoor
With Debitoor invoicing software, you can enter your own accounting year by selecting the dates your company's financial year begins and ends.
If you're reaching the end of your financial year, Debitoor can produce automatic financial reports such as a profit and loss statement, a balance sheet and VAT report, making end-of-year adjustments quick and easy.