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Financial statements are a document containing basic financial information on an enterprise's annual activity. The date for which financial statements are prepared is called the balance sheet date.
Companies registered in the KRS have three months from the balance sheet date to prepare financial statements. If the financial year coincides with the calendar year, the deadline falls on 31 March. However, this year, as in the previous year, due to the pandemic, the deadline was extended to 30 June 2022 for financial sector entities, to 31 August 2022 for public finance sector entities, and to 31 August 2022 for personal income tax payers keeping accounting books. After preparing the statements, a company has three months to approve them. Entities continuing operations must finally close their books no later than 15 days after approving the statements for the financial year.
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Preparing annual financial statements is the responsibility of the heads of the entity, namely:
management board members of companies
partners managing the affairs of general, civil-law and professional partnerships
general partners managing the affairs of limited and limited joint-stock partnerships
liquidators, trustees or administrators in insolvency proceedings
members of management bodies of other entities (to which the Accounting Act applies).
Financial statements for micro and small entities may use certain simplifications compared with larger entities. The balance sheet and profit and loss account for micro and small entities present less detailed data. The substantive content should, however, correspond to the items in the statement version in Annex 1 to the Accounting Act. The legislature stipulated that micro and small entities may use the simplifications only if the approving body adopts a resolution on their use in the financial statements. This format must also be reflected in the accounting policy.
An audit of the financial statements is the primary way to confirm objectively the company's financial position and check the assets and turnover for a given financial year. It is conducted by a statutory auditor. The audit should be completed before the statements are approved – no later than 15 days before the shareholders' meeting. After the audit, the auditor prepares a written report including an opinion on whether the audited entity's financial statements:
- present the financial and asset position and the financial result in accordance with applicable accounting and financial reporting provisions and the adopted accounting policies;
- comply in form and content with the law and the articles or agreement.
Below is our own checklist for preparing annual financial statements and closing the financial year for reporting purposes, to make preparing the document easier.
1. Check continuity of the balance sheet: was the opening balance carried forward, and if so, is it correct?
2. Check whether all documents in the purchase and sales registers have been posted.
3. Review settlements for cash and bank transactions without invoices (whether all invoices have been delivered and, if necessary, inform the client about missing documents).
4. Review settlements to see whether all unpaid invoices should still be shown as unpaid and, if needed, finally agree their status with the client.
5. Check credit balances on account 201 (203) and debit balances on 202 (204) – not everything can always be found in settlements.
6. Compare bank account balances at the end of the financial year with the balances on PDF bank statements and check whether every bank statement was posted.
7. Compare cash account balances at the year end with the cash inventory supplied by the client. Check whether every cash statement was posted.
8. Write off penny differences from the trial balance to eliminate micro-balances at the year end (excluding balances for payroll settlements and settlements with public administration).
9. Compare balances on accounts for settlements with authorities with filed returns and outgoing and incoming transfers.
10. Check employee remuneration – whether all payroll lists have been posted/calculated and whether salary payments were entered correctly.
11. Reclassify remuneration and ZUS contributions as non-tax-deductible costs and make an off-balance-sheet entry in group 9 accounts so prior-year non-tax costs are posted as tax-deductible costs in the following financial year.
12. Compare balances and settlements with balance confirmations sent at the end of the financial year.
13. Generate annual CIT, compare CIT-R payments with actual payments, check payment of the last advance after the new year (especially if the client only works with us until year end, since then we cannot see in the books if it was paid), and compare it with the trial balance. Before sending CIT, confirm all advance transfers. If the books show something unpaid, check with the client whether it was actually unpaid.
14. Post the CIT return and check its balance against the trial balance.
15. Post the JPK V7 return and check its balance against the trial balance.
16. Check whether depreciation for the whole year has been calculated and posted, then compare the current net value of fixed assets with the trial balance to see whether the balances match.
17. Check expense accounts for credit turnover; if present, post it out under accounting rules.
18. Check revenue accounts for debit turnover; if present, post it out under accounting rules.
19. Are the amounts shown in receivables significant (and should the client be notified)? Are they very old (impairment allowances)?
20. Check equity: compare the amount of share capital (fund) with KRS data; check whether prior-year results were posted according to the resolution.
21. Review off-balance-sheet accounts, prepaid expenses and deferred income carried forward from the previous year: do they have balances and should they be reclassified?
22. Check whether periodic postings were calculated and posted (we do not currently use the periodic posting module).
23. Check foreign-currency settlement accounts and write off exchange differences where needed. Check that they were calculated and posted correctly.
24. Check whether the foreign-currency inventory was settled and posted correctly.
25. Revalue foreign-currency accounts for balance sheet purposes (bank accounts and customer/supplier settlements).
26. Inventory: for a trading company, confirm goods inventory at year end. Also check whether advances for goods and services should be included in the costs of the year being closed. Check the account balance and confirm with the client whether the service/goods were performed/delivered in the current period.
27. If the company used so-called anti-crisis shields or government assistance, check whether the assistance loan/grant was fully or partly forgiven under the decision of the district authority, PFR or another responsible body.
28. Reconcile inventory and work in progress with the physical stocktake and write off differences.
29. For liabilities more than two years past the limitation period, post them as taxable revenue under tax provisions.
30. Prepare the profit and loss statement (RZIS) and compare it with the trial balance.
31. Prepare the balance sheet and compare it with the trial balance and profit and loss statement.
32.. Prepare the income tax calculation and compare the result with the CIT return.
33. Prepare the management board activity report.
34. Prepare the notes to the financial statements.
35. Prepare resolutions (on profit distribution / loss coverage and approval of the financial statements).
36. Generate the XML financial-statement file and have the accountant sign it before passing it to the board for signature.
37. Save the signed reporting files, print them and file them in the binder for the financial year.
38. After the KRS approves the statements, transfer turnover from income and expense accounts to the financial result and close the accounting year in the books.
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