Financial arrangements during the annual closure in Chinarussonxiao
With the end of 2022 approaching quickly, this is a critical time for financial controller of a company to prepare for the annual closing of accounts. To achieve a better and a smoother annual closure and, at the same time, to make the necessary preparations for the following year’s audit, the finance controller should complete the following preparations prior to the annual closure.
- Record all expenses for 2022 in a timely manner
Finance Department should inform all departments in advance that expenses for the year will be reimbursed in a timely manner before the end of the year and that missing invoices from suppliers should be recovered in a timely manner and charged to the cost of the business. Employees need to be reminded that if the reimbursement of bills is not timely due to personal reasons, thus preventing the enterprise from taking pre-tax deductions in the year’s remittance, then the individual or a business department should be held responsible.
- Reconcile and clear the current accounts
Current accounts are accounts receivable/accounts payable/other payables/accounts payable/accounts receivable in advance and other receivables. The finance controller of a company should select important customers and suppliers for reconciliation, either manually or by phone, and mark those that are confirmed to agree, so that the auditor can send an audit enquiry letter the following year and ensure that it can be returned. Any inconsistency in the reconciliation should be identified and, if it is a non-payable amount, should be transferred to non-operating income; if it is identified as an uncollectable amount, it should be treated as a non-operating expense – bad debt.
- Conduct an inventory of fixed assets
As an important asset of the company, fixed assets should be inventoried every six months, and at least once a year for small-scale or micro enterprises. The inventory is led by the Finance Department, in conjunction with the relevant company administration/warehouse management or other staff, after determining the time and place, with all parties present at the same time. For any discrepancies in the inventory, after confirmation by all parties and approval by the higher authorities, they are recorded in property losses and gains pending disposal and in the appropriate accounting accounts, as the case may be.
- Random check on accounting voucher
The financial controller should randomly check the accounting information of the enterprise to review whether the accounting information is correct, whether the invoices are complete and whether there are defects in the approval process. If any information is found to be lacking, the accounting/cashier of the enterprise should be notified to make corrections and supplement the accounting information to ensure that the accounting information is true/legal and valid.
- Check the financial budget situation
For enterprises with financial budgets and cost management, the differences between budgets and actual situation should be reviewed again before the end of each year, and where there are significant differences, the causes should be analyzed to identify and resolve the problems. In particular, if there are significant budget and cost variances that cannot be adjusted due to force majeure or external economic influences, the following year’s financial budget and cost management should be adjusted at the same time to reduce the differences between the enterprise budget and the actual costs.
- Re-estimate and reconcile the corporate income tax
The Finance Department should measure the enterprise’s corporate income tax for the year and calculate the corresponding tax rate based on the enterprise’s financial report. Especially for small and micro enterprises, where the state has supportive policies, the enterprise should check whether it can benefit from the preferential band. A review of the relevant expenses of the enterprise should be done to see if they have all been accounted for and if there are any withholding costs that have not been provisionally withheld. For example, in 2022, MSMEs with income tax payable of less than RMB3 million will be eligible for the tax incentives. If the enterprise’s profit exceeds RMB3 million, it is important to examine whether the enterprise has other expenses that have not yet been recorded in the accounts and whether there are cases where payments have been made but invoices have not yet been obtained.
All companies should pay attention to these reminders during the annual closing to make sure everything is in order to start preparing audits.
If you have further questions, please feel free to contact us.