Year-end closing

Year-end closing is vital for maintaining financial accuracy, complying with regulations, making informed decisions, and ensuring transparency in reporting.

Fiscal years

By default, the fiscal year is set to last 12 months and ends on December 31st. However, its duration and end date can vary due to cultural, administrative, and economic considerations.

To modify these values, go to Accounting ‣ Configuration ‣ Settings. Under the Fiscal Periods section, change the Last Day field if necessary.

If the period lasts more than or less than 12 months, enable Fiscal Years and Save. Go back to the Fiscal Periods section and click Fiscal Years. Then, click New, give it a Name and both a Start Date and End Date.

Year-end checklist

Before closure

Before closing a fiscal year, ensure that everything is accurate and up-to-date:

• Make sure all bank accounts are fully reconciled up to year-end, and confirm that the ending book balances match the bank statement balances.

• Verify that all customer invoices have been created and confirmed and that there are no draft invoices.

• Confirm that all vendor bills have been created and confirmed.

• Ensure the accuracy of all expenses and validate them.

• Check that all received payments have been encoded and confirmed.

• Close all suspense accounts.

• Book all depreciation and deferred revenue entries.

Closing a fiscal year

Then, to close the fiscal year:

• Run a tax report, and verify that all tax information is correct.

• Reconcile all accounts on the balance sheet:

  • Update the bank balances in Odoo according to the actual balances found on the bank statements.

  • Reconcile all transactions in the cash and bank accounts by running the aged receivables and aged payables reports.

  • Audit all accounts, fully understanding all transactions and their nature, including loans and fixed assets.

  • Optionally, match payments to validate any open vendor bills and customer invoices with their payments. While this step is optional, it could assist the year-end closing process if all outstanding payments and invoices are reconciled, potentially finding errors or mistakes in the system.

Next, the accountant likely verifies balance sheet items and book entries for:

• year-end manual adjustments,

• work in progress,

• depreciation journal entries,

• loans,

• tax adjustments,

• etc.

During the year-end audit, the accountant may print paper copies of all balance sheet items (e.g., loans, bank accounts, prepayments, sales tax statements) to compare them against the balances recorded in Odoo.

Lock everything date

Setting a lock date prevents modifications to any posted journal entries with an accounting date on or before the lock date. It also prevents posting new entries with an accounting date on or before the lock date. In such cases, the system automatically sets the accounting date to the day after the lock date.

To set a Lock Everything date, go to Accounting ‣ Accounting ‣ Lock Dates. In the Lock Journal Entries window, set the Lock Everything date and Save.

Current year’s earnings

Odoo uses a unique account type called current year’s earnings to display the difference between the income and expense accounts.

To allocate the current year’s earnings, create a new miscellaneous entry with a date set to the end of the fiscal year to book them to any equity account.

Then, verify whether the current year’s earnings on the balance sheet correctly show a zero balance. If so, a Hard Lock date can be set to the last day of the fiscal year in Accounting ‣ Accounting ‣ Lock Dates.