Every December, finance teams run the same race. Revaluations, accruals, depreciation, tax provisions and closing entries all compete for the last days of the year, while auditors and group reporting deadlines wait. One skipped step means a trial balance that does not tie, a stack of correcting entries and a late January. A clear year-end close checklist turns that race into a routine.
This guide walks through the year-end closing process in the right order, with a worked example, the mistakes that cause rework, and how WAGONN Thalamus (ERP/Fi) runs the close from a single screen, including Turkish statutory requirements and IFRS.
What Is the Year-End Closing Process?
The year-end closing process is the set of valuation, accrual, allocation and closing entries that make the books show the correct result for the fiscal year. Income and expense accounts are closed to retained earnings, balance sheet accounts carry forward, and the period is locked so the reported figures can no longer change.
It has two layers:
- Month-end close: recurring tasks such as VAT closing, FX revaluation, accruals, depreciation and cost allocations.
- Year-end close: the final month-end plus tax provision, closing of the income statement, balance sheet carry-forward and transfer of the result to retained earnings.
Companies with a Turkish entity add a local layer: the Turkish uniform chart of accounts (TDHP) has dedicated closing accounts (690, 692, 590/591, 570/580), and the legal journal must be filed as e-Defter.
The Year-End Close Checklist in 8 Steps
| Step | Task | Turkish TDHP accounts |
|---|---|---|
| 1 | Complete documents, reconcile partners and banks | 120, 320, 102 |
| 2 | Revalue open foreign currency items | 646 / 656 |
| 3 | Book accruals and prepayments | 180, 280, 381 |
| 4 | Run depreciation | 257, 268 |
| 5 | Allocate cost accounts to the income statement | 7xx → 6xx |
| 6 | Close the VAT period | 191, 391 → 190 or 360 |
| 7 | Book the corporate tax provision | 691 / 370 |
| 8 | Close the income statement and transfer the result | 690 → 692 → 590/591 → 570/580 |
- Complete and reconcile. All December invoices, delivery notes and expense documents are in. Confirm balances with customers, suppliers and banks.
- FX revaluation. Open receivables, payables and bank balances in foreign currency are revalued at the closing rate; the difference goes to FX gain or loss.
- Accruals. Expenses incurred but not yet invoiced are accrued; prepayments for next year are deferred.
- Depreciation. The final period's depreciation is posted for all fixed assets.
- Cost allocation. Under the Turkish 7/A option, cost accounts (7xx) are reflected into the income statement accounts (6xx).
- VAT closing. Output VAT (391) is netted against input VAT (191). A surplus of output VAT becomes VAT payable (360); a surplus of input VAT is carried forward (190).
- Tax provision. Corporate income tax is provided on taxable profit at the statutory rate.
- Close and transfer. Income statement accounts close to 690 (profit before tax), then 692 (net profit), then 590 (net profit) or 591 (net loss). In the new year the result moves to retained earnings (570) or accumulated losses (580).
Worked example
December VAT: output VAT 120,000, input VAT 85,000. The 35,000 difference is transferred to VAT payable.
Annual income statement (TRY):
| Line | Amount |
|---|---|
| Revenue | 5,000,000 |
| Cost of sales | (3,200,000) |
| Operating expenses | (1,100,000) |
| Other income | 100,000 |
| Finance costs | (200,000) |
| Profit before tax (690) | 600,000 |
| Tax provision (25% assumed for illustration) | (150,000) |
| Net profit (692 → 590) | 450,000 |
In the new year, 450,000 is transferred to retained earnings. The tax rate is illustrative; use the statutory rate in force.
Where Spreadsheets and Basic Accounting Software Fail
- Wrong order. VAT or tax is calculated before revaluation and allocations, so the numbers have to be redone.
- Posting into closed periods. Backdated entries change a month whose VAT return is already filed and shift legal journal numbering.
- Deleting instead of reversing. The audit trail disappears and auditors find unexplained differences.
- Double-counted closing entries. Manually stored balance sheet closing and opening entries zero out or double balances in reports.
- Stored balances. A trial balance kept in a spreadsheet drifts from the ledger, and nobody knows which one is right.
- IFRS on the side. Local GAAP figures are adjusted by hand every year for group reporting.
How Thalamus Runs the Year-End Close
Thalamus brings the close into one Period End screen under the chart of accounts:
- Period-end checklist: VAT period closing, FX revaluation of open items, accruals of recurring expenses, the depreciation run and cost reflection are tracked in one place.
- VAT closing: input VAT (191) and output VAT (391) are netted into VAT carried forward (190) or VAT payable (360). A closed VAT period can be reopened by reversal.
- Monthly cost reflection: 7/A cost accounts are reflected into 6xx; last month's reflection runs automatically as a nightly job.
- Fiscal year close in one operation: the final month's cost reflection, the corporate tax provision entry and the closing of income statement accounts 6xx → 690 → 692 → 590/591 run as a single step.
- Derived balance sheet closing and opening: these entries are derived, not stored, so balances are never double counted in any report.
- Result transfer: in the new year the result is transferred to retained earnings (570) or accumulated losses (580).
- Period lock and document integrity: posted documents are immutable; corrections are made only by reversal entries. An optional segregation-of-duties rule requires that a reversal is posted by someone other than the user who posted the original entry.
- Live trial balance: computed from the journal on demand. There are no stored balances to drift.
- Statutory books and e-Defter: legal journal and general ledger with continuous entry numbering from the start of the fiscal year, plus e-Defter export in XBRL-GL format (journal YEV and ledger KEB). Signing and the GİB receipt are completed through your e-Defter provider.
- Local GAAP and IFRS in one system: a parallel IFRS ledger is derived from the local ledger, IFRS adjustment rules run at month end, and the balance sheet and income statement are available per ledger.
For partner balance confirmations, the Receptor finance portal lets customers and suppliers view statements and reconcile themselves.
Year-End Close Checklist (Copy and Use)
- All sales and purchase invoices, delivery notes and expenses for the year posted
- Customer and supplier balances confirmed
- Bank accounts reconciled to statements
- Open foreign currency items revalued at closing rate
- Accruals and prepayments booked
- Depreciation run completed
- Cost accounts allocated to the income statement
- December VAT period closed
- Corporate tax provision booked
- Income statement closed to the period result
- Period locked, e-Defter files generated
- Result transferred to retained earnings in the new year
Next Step
A fast close depends on process order as much as software. Explore our ERP solution or contact us to walk through a year-end close in Thalamus with your own chart of accounts.
FAQ
What are the steps in the year-end closing process?
Complete and reconcile documents, revalue foreign currency items, book accruals and depreciation, allocate costs, close VAT, book the tax provision, then close income statement accounts to the period result and transfer it to retained earnings.
What is the difference between month-end and year-end close?
Month-end close repeats valuation and accrual tasks every month. Year-end close adds the tax provision, closing of income and expense accounts, balance sheet carry-forward and transfer of the result.
Why are closing entries posted only by reversal after the close?
Changing or deleting a posted entry destroys the audit trail. A reversal entry cancels the error visibly, and a new correct entry follows, so every change remains traceable.
How long should a year-end close take?
If month-end tasks run every month, the year-end close is mostly the final month plus a few closing entries and can be done in days rather than weeks.
Can one system handle Turkish local GAAP and IFRS?
Yes, with a parallel ledger. The local TDHP ledger stays the legal book, while an IFRS ledger is derived from it and adjusted at month end for group reporting.
