Year-end adjustments are journal entries made at the end of the financial year to ensure accounts accurately reflect the year's financial activity. They include accruals, prepayments and provisions.
Year-end adjustments (also called closing entries or adjusting entries) are the final entries made before financial statements are prepared. They ensure that the financial statements accurately reflect the economic reality of the year, not just the cash movements. Common year-end adjustments include: accruing expenses incurred but not yet billed (like utility costs), recording prepayment adjustments (spreading annual costs like insurance), processing depreciation and amortisation, writing off bad debts, adjusting inventory to physical count, recording provisions for known liabilities, recognising deferred revenue and tax adjustments. These entries are typically prepared by the accountant or bookkeeper and reviewed before final financial statements are generated. In Xero, year-end adjustments are recorded as manual journal entries with appropriate narrations and supporting documentation. SortBooks assists with year-end by keeping books clean throughout the year and identifying adjustments needed based on patterns in your transaction data.
SortBooks helps with the bookkeeping behind year-end adjustment by connecting to your Xero account and using AI to suggest the right account for transactions sitting in catch-all accounts, learning from your own past coding. Instead of fixing year-end adjustment by hand, you review each suggestion, approve it, and SortBooks updates Xero, GST code included. Then ask the AI CFO about your numbers, using live Xero data.
A journal entry is a record of a financial transaction in the accounting system. It includes the date, accounts affected, amounts and a description of the transaction.
Accrued expenses are costs your business has incurred but not yet been billed or paid for. They are recorded as current liabilities to accurately reflect your obligations.
Depreciation is the accounting method of allocating the cost of a tangible asset over its useful life. It reduces taxable income each year and reflects the asset's declining value.
The financial year (or fiscal year) is the 12-month period your business uses for accounting and tax reporting purposes. It may or may not align with the calendar year.
Financial statements are formal reports that summarise your business's financial position and performance. The three core statements are the profit and loss, balance sheet and cash flow statement.
Connect Xero, check the AI's suggestions and approve the changes. SortBooks updates Xero for you.