Taking into account upcoming Year-end closure, we would like to draw your attention to a few important issues related to the closing of the books of accounts.
Inventory
The Polish Accounting Act requires each entity to make an inventory of the assets. The inventory is made by taking a physical inventory (e.g. inventory), by obtaining the balance confirmation from the bank or clients (e.g. receivables), or by verification consisting in comparing the accounting records with relevant documents and verifying the value of these components (e.g. land , disputed receivables or tax liabilities). Below we present the main principles of the inventory of individual assets.
At the same time, we would like to emphasize that the conduct and results of the inventory should be properly documented and linked with the entries in the books of accounts. Disclosed in the course of the inventory differences between the actual state and the state shown in the books of accounts should be explained and accounted for in the books of accounts.
Inventory of stocks
In the event that your company has inventories on the balance-sheet, it is necessary to carry out a stock inventory. This inventory shall be carried out in the form of a physical inventory in relation to:
- own stocks,
- stocks owned by other entities.
As a general rule, the inventory must be taken on the last day of the financial year.
Inventory of fixed assets
Fixed assets owned by your company are also subject to inventory. Inventory of fixed assets is carried out in the form of a physical inventory in relation to:
- real estate classified as fixed assets and investments, as well as other fixed assets located on guarded premises and machinery and equipment included in fixed assets under construction – once every 4 years at any time,
- fixed assets located on unguarded premises – in the last quarter of the financial year, by the 15th day of the following year,
- machinery and equipment located on unguarded premises and forming part of fixed assets under construction – in the last quarter of the financial year, by the 15th day of the following year.
Inventory of cash in hand
If your company has cash (cash equivalents) in hand, it is necessary to carry out an inventory. It is carried out on the last day of each financial year in the form of a physical inventory.
The inventory covers cash assets in domestic and foreign currencies and foreign currencies.
Confirmation of balances with banks
According to the regulations in force, if you have money in your bank, you should receive a corresponding confirmation of the bank balance from your bank.
Confirmation of balances of amounts receivable
In accordance with the Polish Accounting Act, any entity that reports trade receivables is required to reconcile them by means of a balance confirmation sent to customers. Appropriate confirmations of balances will be prepared by us and the form and date of their delivery to the customers will be agreed with you in advance.
Confirmation of balances of amounts due (liabilities)
In accordance with the applicable regulations, it is not necessary to confirm the liability balances. In line with usual practice, the entity’s liabilities should be reconciled by receiving a balance confirmation from your suppliers (on their side it is the receivables that need to be confirmed).
Reserves (accruals)
In order to correctly determine the financial result, it is important to recognize all costs for a given period in a given financial year. For this purpose, please provide, in time allowing the closing of the financial year, information on provisions for costs to be recognized in a given year, in particular provisions:
- for unreceived purchase invoices relating to a given financial year,
- for employee benefits, including provision for holidays, pensions (if applicable) and bonuses,
- on account of guarantees and sureties granted,
- for the costs or penalties of remedying environmental damage,
- on the impact of pending court cases,
- other.
Completeness of revenue
In the books of an entity it is necessary to recognise all revenue earned and attributable to it and the costs relating to that revenue for a given financial year, irrespective of the date of payment. To this end, we draw attention to the need to verify the completeness of the revenue and, where it is not possible to issue a sales invoice, to provide us with the relevant information in order to establish a possible revenue provision.
No business continuity risk
In the absence of relevant information, the financial statements for the financial year will be prepared on a going concern basis.
Please provide appropriate information if you are aware of facts or circumstances that may cause a threat to the continuation of your company’s activities in a substantially unchanged scope for at least 12 months from the balance sheet date.
Valuations
Some assets may be subject to valuation at fair value. In connection with the year end, please provide updated valuation reports from the Company’s property valuers, if any.
Other relevant information
An entity’s financial statements require disclosure of additional information and data not necessarily included in the accounting records maintained. To this end, please provide in advance other relevant information to be disclosed in the financial statements, in particular:
- information on pending court cases,
- information about the terms and conditions of contractual agreements, the non-fulfilment of which could have a material impact on the data included in the accounts,
- donations received or given but not recorded in the accounts,
- information about revenues, costs and results of operations discontinued in the financial year or expected to be discontinued in the following year,
- all other information, such as records, documents and other matters and related information, including that which has arisen after the balance sheet date and of which you are aware, that is relevant to the preparation of the financial statement.
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