As Financial Year 2021-22 has been completed, it calls for certain checkpoints that each business shall ensure before they close their books. Our team of experts have listed below points to ensure accountants and management are on top of the year end checklist and the same have been listed below for your perusal.
- Deduct TDS on year end provisions: This has been observed that company generally fails to deduct TDS on year end provision of expenses like Audit Fees, Annual Filing Charges etc. Company needs to make sure that proper TDS has been deducted & paid in these cases.
- Verification of Closing Stocks as on 31.03.2022: In tax audit cases, also for closing of books, we need to have quantity-wise & item-wise value of closing stocks as on 31.03.2022. Hence company need to document this detail as on 31.03.2022.
- Collecting Loan & FD statements: Accountants are advised to collect all running loans & Fixed Deposits and records actual/accrued interests properly.
- Taking balance confirmations of all running parties: Accountants are advised to collect balance confirmations and ledgers of all sundry creditors & sundry debtors and reconcile the balances. This needs to be reconcile with 26AS as well.
- Taking proofs from employees against their Investment mentioned in their declaration and deduct balance TDS: Accountants have tendency to deduct TDS as per declaration filed by employees in the beginning of financial year. But in many cases it has been found that employees fails to invest as mentioned in their declarations, hence it is advisable to collect all proofs as mentioned in the declaration and re-compute tax liability & deduct balance TDS while making payment of salary for March month.
- Reconcile Inter-branch balances: Company should reconcile inter-branch balances and balances of subsidiary companies otherwise closing company’s books at year end would be challenging.
- Taking reimbursement sheets from all employees: Accountants should take reimbursements sheet from all employees including directors related to F/Y 2021-22 and record all expenses related to F/Y 2021-22 in F/Y 2021-22 only. It has been found in many cases that accountants fail to take these sheets timely and records these expenses in next financial year.
- Collecting Bank Statements: Keep/download bank statements and maintain BRS as applicable.
- Download all GSTR-2A/2Bs: Accountants are advised to download all GSTR-2A and GSTR-2B related to F/Y 2021-22 and record GST Inputs if it hasn’t been recorded except ineligible ITC. If any input recorded in books is not appearing in GSTR-2A, accountants are advised to highlight these cases with the concerned parties and ask those parties to take corrective action.
If any transaction is appearing in the GSTR-2A and not recorded in the books, please check whether that expense belongs to the company or not and record the same, if needed.
- Reverse GST Inputs if payment pending or not made: In cases where company has recorded GST Inputs and it has been more than 180 days and payment hasn’t been made so far, company needs to reverse these Inputs and pay the corresponding tax liability along with interest.
- Double check the income where GST not paid or paid at lower rate: In all cases, where GST hasn’t been paid or paid at lower rate, please reconfirm the same with your consultant. In case of exempt export supplies, please ensure that proper LUT is in place.
- Double check the expenses where TDS hasn’t been deducted: In all cases where TDS hasn’t been deducted on expenses, please reconfirm the TDS applicability with your consultant & take corrective action, if needed. Also check the applicability of Equalisation Levy.
- Payment of Tax: In case if adequate advance taxes are not paid, please make sure the payment of balance taxes in April 2022 to avoid further interest under section 234B of Income Tax Act, 1961.
- Record Foreign Exchange Fluctuations Properly: In case of Foreign Parties or Assets/Investments where balance is outstanding/pending ascertain Foreign Currency Value as on 31/03/2022, apply AS-11 and record fluctuation difference properly. Take help of consultant if required.
- Reconcile unconsumed challans: Reconcile unconsumed challans as per Traces as on 31.03.2022 with the debit balance showing in the books.
- Match GST ledger balances: Reconcile GST ledger balances as on 31.03.2022 (Electronic Cash Ledger, Electronic Credit Ledger & Electronic Liability Ledger) with the balances showing in the books.
- GST on Advances: Check whether GST has been paid on advances appearing/received from customers as on 31.03.2022. This needs to be paid in case of services.
- TDS on Advance Payments: Check whether TDS has been paid on Advance Payments made to suppliers, especially where balances appearing in the books as on 31.03.2022.
- ESI or PF Registration: If these registrations were not applicable earlier due to lower number of employees, please recheck their applicability and apply for registration under EPF/ESI if anytime during the year number of employees have exceeded the number 20 or 10 as the case may be.
- GST Refund: Please make sure that GST refunds in different scenario are applied before the expiry of time limits prescribed. There is a general time limit of 2 years for applying refund in GST.
- Record Salary of Founders: In many cases especially in Startups we have observed that founders/directors don’t take salary properly during the year & take final call on this amount after the end of Financial Year while filing their personal ITRs later in July, hence company ended up paying their TDS component with interest. Accountants are advised to discuss the same with founders/directors & record the final amount in March 2022 itself & pay TDS accordingly.
- Recording Depreciation on Fixed Assets: Accountants are advised to make sure that proper depreciation as per Schedule II of Companies Act, 2013 has been recorded on Fixed Assets appearing in companies’ books.
- Loan to Directors or Interested Parties: Loan to directors or any other person in whom director is interested is prohibited by Companies Act, 2013 subject to certain exceptions. Accountant needs to make sure the company is not providing or would not provide any such loan or guarantee.
- Transfer Pricing: Please ensure that your books are aligned with the agreement executed between the Holding company or Subsidiary Company or Associated Enterprises.
- E-invoicing mandatory w.e.f. 01.04.2021: The Government has ruled mandatory E invoicing for turnover above Rs.500 crores w.e.f. 01st October 2020, for turnover above Rs.100 crores w.e.f. 01st January 2020 and for turnover above Rs.50 crores w.e.f. 01st April 2021. Now, the companies and other entities having turnover above Rs. 20 crores have to mandatorily issue E invoices w.e.f. 01st April 2022. Companies need to note down that ITC might not be available to recipient if supplier is not complying with E-invoicing.
- Input Tax Credited or Restricted ITC as per 36(4):
Make sure all GST inputs recorded in the books are appearing in GSTR-2A/2B of F.Y. 2021-22. In case it is not appearing, inform to respective parties timely and ask them to fix the same in their returns before the prescribed timeline (i.e. before filing the return of September 2022 or Annual Return whichever is earlier). Also take care of ITC restriction of 10% or 5% as per 36(4).
- Important GST Reconciliation:
- Reconciliation of GSTR-3B with books
- Reconciliation of GSTR 1 with GSTR 3B
- Reconciliation of GSTR-1 & books
- Reconciliation of GSTR-2A/2B with GSTR-3B
- Reconciliation of GSTR-2A/2B with books
Make sure these above reconciliations are well prepared and required adjustment in books & returns are done.
- Letter of Undertaking:
The LUT should be applied for the Financial Year 2022-23 on or before 31st March 2022 so that the exports orders don’t face any issue at the last moment.
- Letter of Undertaking:
- Tax Residency Certificate:
In case if any foreign party deducts TDS (or Withholding Tax) of the company, please make sure that the TRC should be applied for the Financial Year 2022-23 in April 2022 so that company can claim the the benefit of DTAA and avoid/reduce the TDS deduction.
- Annual Information System (AIS):
Please make sure that amounts (Sales, Purchases, Interest etc..) appearing in the AIS are reconciled with the amounts appearing in the books of accounts.
Disclaimer: The above points are for the informational purpose only, for & based on our clientele and do not constitute an advice or a legal opinion. If reader needs details or want to enquire detail related to any of the above points, please write us to firstname.lastname@example.org.