Maintenance of an entity’s books of accounts is usually entrusted to an in-house bookkeeper or an external entity (accounting firm). Supervision and responsibility for the bookkeeping is most often performed by a specific member of the board of directors, with the signing and responsibility for the financial data included in the annual financial statements resting with the entire board of directors.
As the deadline for closing the books and preparing the financial statements inevitably approaches, here is a checklist for management before signing the financial statements. It allows you to quickly verify the accuracy and completeness of the financial statements.
Stocktaking
The Polish Accounting Act requires each entity to take inventory of its recognized assets. Stocktaking is performed by means of a physical inventory (e.g., inventories), by means of confirmation from the bank or counterparties of the balance confirmation (e.g., receivables), or by means of verification consisting in comparing the data of the accounting books with relevant documents and verifying the value of these components (applies, for example, to land, disputed receivables, receivables or tax liabilities).
It is important that the inventory be properly documented and accounted for, and that the differences between the actual balance and the balance shown in the books of accounts revealed in the course of the inventory be explained and accounted for in the books of accounts.
If the entity conducts warehouse management, it is necessary to take an annual inventory of inventory. The inventory obligation also applies to own and entrusted fixed assets.
Inventory of fixed assets is carried out in the form of a physical inventory for:
If the Entity has cash (cash) in hand, it is necessary to conduct an inventory of it. It is carried out on the last day of each fiscal year in the form of a physical inventory.
Confirmations of balances
A specific form of inventory of assets are confirmations of balances from the bank and contractors. This form of inventory, however, is not used to confirm the balances of disputed and doubtful receivables, receivables due to non-bookkeepers and receivables under public law. These types of receivables are inventoried by comparing the data recorded in the books with the relevant documents and verifying their value.
In accordance with the current regulations, in the case of holding cash in the bank, the entity should receive from its bank an appropriate confirmation of the bank balance.
According to the Accounting Law, any entity showing trade receivables is required to reconcile them by means of a balance confirmation sent to customers, and any discrepancies explained.
It should be noted that the regulations do not require confirmation of accounts payable balances. According to accepted practice, the entity’s liabilities should be reconciled by means of a balance confirmation received from suppliers (in their case, they are receivables).
Completeness of revenues
In the books of an entity, it is necessary to recognize all revenues earned, attributable to it, and the costs charged to it related to these revenues relating to a given fiscal year, regardless of the timing of their payment.
To this end, we draw attention to the need to verify the completeness of revenues, and in cases where the issuance of a sales invoice is not possible to create a provision for revenues. If significant sales adjustment invoices have been issued after the end of the fiscal year, it is necessary to consider the appropriateness of a provision reducing revenue.
Provisions for costs
In order to properly determine the financial result, it is important to recognize all costs attributable to a given period in a given fiscal year. For this purpose, cost provisions should be established in the books of a given year:
Valuations and write-downs
For the purpose of closing the accounts, in addition to the balance sheet valuation of foreign currency items, other valuations of assets should be verified. In the case of assets valued at fair value (e.g., investment real estate, shares of listed companies), care should be taken to obtain current valuations by appraisers, or stock exchange quotations as of the balance sheet date. If you have financial instruments (e.g., an IRS instrument), you should book its current valuation as of the balance sheet date.
Individual assets should be analyzed for the need to create write-downs. The valuation of assets is carried out in accordance with the principle of prudence, which dictates that the value of assets at which they are reported in the books and financial statements be updated to their recoverable value, if this is lower than the value at which the asset is reported in the books as of the balance sheet date. This means that the balance sheet valuation of assets must take into account the previously unplanned reduction in their value in use or commercial value in the form of write-downs.
No threat to going concern
The preparation of annual financial statements involves the application of the going concern principle (going concern assumption). It is fundamental, because depending on the determination of whether or not the entity will continue as a going concern, different methods of valuing assets and liabilities are used.
When analyzing the entity’s ability to continue as a going concern, the entity’s manager takes into account all information available at the date of the financial statements regarding the foreseeable future, covering a period of not less than one year from the balance sheet date, and appropriately documents the reasonableness or otherwise of the going concern assumption. For the purpose of analysis and assessment, the entity’s manager shall take into account, in particular, events or circumstances that, individually or in combination, may indicate significant uncertainty about the entity’s ability to continue as a going concern. Events or circumstances that may limit or prevent the ability to continue as a going concern can be divided into financial, operating and other.
Other relevant information
The entity’s financial statements require disclosure of additional information and data, not necessarily included in the accounting records maintained. In particular, this information is:
Signing of the financial statements
The financial statements shall be prepared in electronic form and bear a qualified electronic signature, a trusted signature or a personal signature. Financial statements of entities entered in the Register of Entrepreneurs of the National Court Register shall be prepared in the logical structure and format made available on the website of the Minister of Finance (xml structure).
The financial statements shall be signed by both the person entrusted with keeping the accounts and the management. Refusal to sign the financial statements requires a written justification attached to the financial statements.
In some cases, not all members of the board of directors (especially foreign persons) have a trusted signature (epuap) or a valid and current qualified signature. In such cases, only one member of the board of directors may sign the financial statements, with the other members who do not sign the financial statements having to submit a special statement confirming that the financial statements meet the requirements of the Accounting Law. Such a statement must be made before the financial statements are signed by an elected board member. This procedure also applies to the management report.
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