Definition of Accounting Close

As its name indicates, the accounting closing is an operation typical of the accounting. It consists of closing three types of accounts: the income account, the expense account and the cost account. These accounts are closed by handing over everything that has accumulated during a specified period, normally from January 1 to December 31. These accounts are closed against another specific account, the profit and loss account.

The objective of the accounting closing is to evaluate the profits or losses of an activity business. In other words, if the final result is positive, there is an increase in the heritage business and if the final result is negative there is a decrease in the assets of the company.

Considerations on the accounting closing

This procedure involves a series of preliminary questions. On the one hand, review each of the asset, liability, equity, depreciation or bank reconciliation accounts. Once these adjustments have been made, the accounting close must be carried out.

The accounting close must be understood within the context of international reporting standards. financial.

In the accounting closing process, a series of accounting entries are made with the objective of updating the accounts.

The accounting close within the framework of the accounting cycle

The accounting cycle is understood to be the whole process by which the information of a company and its financial activity is recorded.

The accounting cycle consists of three different phases

1) opening of accounting,

2) development phase and

3) accounting closing.

The accounting is opened at the beginning of each financial year with the following processes: the Inventory and the opening of accounting books in which the data for the year ending the previous year are incorporated.

In the development phase they are recorded in the Diary book the accounting events that occur during a fiscal year, as well as the trial balance of sums and balances where there is the debit and credit of the book higher.

Finally, a series of steps are carried out during the accounting closing: the accounting regularization, the determination of the result, the closing of accounts and the presentation of annual accounts.

On conclusionIn the accounting cycle, a period of time is contemplated and a set of operations and procedures are carried out in order to reflect the financial status of a company.

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