Accounting technology / Glossary / Year-end close

What is year-end close?

Definition

Year-end close is the process of finalising a company's accounts for the financial year. It includes everything in a month-end close plus annual work: audit adjustments, tax provisions, a full review of estimates such as provisions and impairments, closing income and expense accounts to retained earnings, and preparing the annual financial statements and filings.

Also calledannual closefiscal year-end close

Compare the softwareBest month-end close software →All 14 financial close vendors →

Adds: Audit, tax, annual statements
10-K deadline: 60 to 90 days after year-end
UK private company accounts: Within 9 months

How year-end close differs from month-end

The last month of the year is closed as usual, then the annual steps follow. Fixed assets, inventory and receivables are counted or tested; provisions, impairments and other estimates are reviewed in full; the current and deferred tax charge is calculated; and auditors test balances and controls, often proposing adjustments that are booked in the ledger. The income and expense accounts are then closed to retained earnings so the new year starts at zero, and the period is locked. The annual report follows within legal deadlines: UK private companies file accounts with Companies House within nine months of year-end, and US public companies file Form 10-K within 60, 75 or 90 days depending on their size. Close software such as BlackLine and FloQast tracks the extra tasks, and Workiva links close data to annual filings.

Common questions

What is a closing entry?+

A journal entry at year-end that transfers the balances of income and expense accounts to retained earnings, so those accounts start the new year at zero. Most accounting software does this automatically when the year is closed.

Why does year-end close take longer than month-end?+

It adds work that is done only once a year: physical counts, full reviews of estimates, the tax provision, audit testing and adjustments, and the annual financial statements and notes.

Can the books be changed after year-end close?+

Once a year is locked, changes are made as prior-period adjustments in the open year, under the accounting standards' rules for errors and changes in estimates. Locking the period stops accidental postings into closed years.