Insights from the last financial statements processing


On May 2, the deadline for electronic filing of 2023 tax returns ended for corporations and individuals who do not have an audit or do not use a deferred filing form with a tax advisor.

At Jaspar accounting firm, most of the filings were for corporate, i.e. (double-entry) accounts. In today’s article we briefly summarise for you the insights we have from this year’s returns.


Before preparing the return, we deal with the inventory of accounts

To understand all the context from the article, it is important to note that account inventories should be conducted before the preparation of the accounts and tax return. These can only be compiled when all the primary documents (i.e. bank statements, invoices, cashbooks, internal documents, etc.) have been entered in the accounts.


There must be supporting documents for movements in the bank

We have come across a problem in some companies that the bank movements did not have a title, in other words a supporting document. Therefore, it is necessary to agree whether it is within the company’s power to trace the documents or whether the expenditure in question will be a non-tax expense.


Each accounting transaction recorded in two accounts

Another problem was that the company (or the responsible representatives) did not know what the account balances consisted of. Double-entry bookkeeping works on the principle of double entries. Thus, each accounting transaction is recorded in two accounts, “on the left side of the “Should give” and on the right side of the „Gave””. Each entry in one of these accounts is paired with an entry in the other account.

This principle makes it easy to perform checks and everything must match to the penny. Of course, errors do occur, but these are quickly detected by regular checks. We should therefore know what the account balances consist of. Let’s take a few examples:

  • The accounts receivable ledger, i.e. unpaid invoices issued, must match the 311 – Customers account. The list of unpaid invoices received, accounts payable, must agree with account 321 – Suppliers.
  • If the company is a VAT payer, the VAT return must agree with account 343.
  • If it has employees, the payroll recapitulation for the last month of the year is linked to accounts 33 – Settlement with employees, etc.

There may be reasons for the inventory difference. However, you must be able to explain and document them.

Document control and account inventories avoid missing expenses or revenue. Or we may have missed a tax or insurance payment.


Caution on accounting for bank loans

Another area with potential problems is bank loans, which are used by many companies. These liabilities, most commonly recorded in accounts 46 – Long-term payables to credit institutions or 23 – Short-term loans, must agree with the balances on the credit account statements. In this way, we are able to check that we have correctly recorded the loan principal and accessories (i.e. fees and interest).


Recurring costs

When dealing with closings and returns for our clients, we have also encountered that not all regular payments have been posted to the books. It’s a good idea to check that you have 12 times booked rent, invoices from phone companies, commissions… We will also check that these items have been paid.


Unfortunate Unfinished Business

Flaws often appeared in Account 12 – Own Production Inventory, specifically Account 121 – Work in Progress. One example: an entity incurred costs in 2023 that could not be invoiced or transferred to a product warehouse in that year. This usually happens because not all the work has been done and the work, product or contract has not been completed. The value of these costs represents the value of work in progress in the accounts and is required to be included in inventory (own production inventory).


Cost and revenue accrual

It is necessary to note that the recognition of costs and revenues must take place in the period to which they are materially and temporally related. We recognise revenue in the period in which it is incurred and allocate costs to it. If costs are incurred before final invoicing, we need to time them.


accounting for depreciation and damage

The last thing we would mention was errors in accounting for shortages and damages. Accounting entities must give a true and fair view of the state of assets and liabilities. If the state of assets does not correspond to reality, this discrepancy must be accounted for. And most importantly – be aware of the tax aspect. Section 25 of the Income Tax Act states that losses and damages in excess of compensation cannot be recognised as expenses (costs). It would not be the law not to have an exception. §Section 24(2)(I) lists as tax deductible damages incurred as a result of natural disasters or, for example, damages alleged by the police to have been caused by an unknown perpetrator.


Accounts must be entered in the register

Another caveat, which applies only to those accounting entities that are registered in the public register and are required by the Accountancy Act to publish their financial statements in the Collection of Deeds. The financial statements must be published within 30 days of approval by the competent authority and verification by the auditor and at the same time no later than 12 months after the balance sheet date, i.e. generally by 31 December of the following calendar year. For example, the accounts for the year 2023 must be published no later than 31.12.2024. If you fail to comply with this obligation, you may be fined up to 3% of the total value of the company’s assets. A long-term failure to comply with this obligation may then lead to a court decision to dissolve the company (usually at someone else’s initiative).



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