Balance sheet

accounting

The accounting closing is the process by which a company obtains the result for the year. This is the accounting result and it is the one that appears in the company's annual accounts (in the balance sheet and in the profit and loss account).

The accounting closing is, therefore, the result approved by the partners in the General Meeting and that, later, is distributed between dividends and reserves. It is important not to confuse the accounting result with the tax result.

Accounting adjustment Accounting cycle

Process to obtain the accounting result: accounting closing

The accounting closing process to obtain the accounting result is carried out on the closing date of the fiscal year, which is usually December 31. This process consists of several phases:

  1. First, we obtain the difference between all the income and expenses obtained during the year. This includes both operating income and expenses as well as financial income and expenses, as well as extraordinary results.
  2. Second, we make so-called accounting adjustments. These allow us to obtain expenses for amortization, impairment, inventory regularization, accrual of expenses and income, adjustments for revaluation of assets and liabilities and reclassification from long to short term.
  3. From the accounting adjustments, we obtain a series of expenses and income that we will integrate into the result obtained in the first phase. The result that we obtain after accounting adjustments is the accounting result before taxes.
  4. We subtract the income tax or income tax from the accounting result before taxes. We obtain this from the tax base obtained in the fiscal closing.
  5. After deducting the income tax, we obtain the accounting result after taxes. This is the final accounting result that appears in the company's annual accounts.

Difference with the fiscal closing

The tax closure allows us to obtain the tax base from which we calculate the corporate tax. But this tax base is not the same concept as the accounting result before taxes, which we obtain at the accounting close. Here is a diagram to understand the differences:

  1. We obtain the result before taxes (accounting closing).
  2. From this result we make a series of off-the-books adjustments through which we obtain the tax base (fiscal closing).
  3. From that tax base, we calculate the corporation tax. This tax will be subtracted from the accounting result before tax (that of point 1) and we will obtain the accounting result after tax.

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