Closing the annual accounts: what it takes

The year-end closing is the moment when the ongoing bookkeeping becomes a proper set of annual accounts: a balance sheet, an income statement and notes that capture the financial year. For Swiss corporations it is a legal obligation, not an optional exercise. Arriving well prepared makes the difference between an orderly closing and weeks of after-the-fact reconstruction.

What the closing produces

Under the Code of Obligations, the annual accounts of a GmbH or AG consist of three parts:

Balance sheet: assets, liabilities and equity at a specific date, usually 31 December.
Income statement: income and expenses for the year, with the result for the period.
Notes: the supplementary information required by the CO, which explain and complete the figures.

These documents must comply with the principles of clarity, completeness, prudence and consistency. It is not enough for the numbers to “add up”: they must represent the real situation in a way that is understandable to a competent third party.

The adjusting entries

Most of the closing work lies in the adjusting entries, which align the bookkeeping with the accrual basis of the financial year. The main ones:

Accruals and deferrals: costs and income must be allocated to the year they relate to, not the year in which they are paid or received. Rent paid in advance for the following year must be deferred.
Depreciation: fixed assets lose value over time and this must be recorded according to a consistent plan.
Provisions: for risks and obligations that are probable but not yet certain in amount — warranties, litigation, restoration work.
Inventory valuation: at cost or at market value if lower, in line with the prudence principle.
Receivables adjustment: any bad debts or value adjustments on doubtful receivables.

Valuations and reserves

The CO takes a prudent approach. Assets may not be overvalued, and in certain cases the law allows conservative valuations that generate hidden reserves. This margin must be used consistently over time: the result cannot be inflated or compressed at will from one year to the next without reason.

The closing also requires checking the reconciliation accounts with VAT and with social insurance, so that the balances owed to the FTA (Federal Tax Administration) and to the funds match the statements actually filed.

The notes: not a formality

The notes to the annual accounts contain information the balance sheet alone does not show: the valuation principles applied, the amounts and nature of any reserves, information on holdings and commitments. For larger companies the mandatory content is more extensive. Neglecting the notes is one of the most common mistakes: annual accounts without adequate notes are incomplete in the eyes of the CO and the auditor.

Approval and timelines

Once drawn up, the annual accounts follow a precise path:

Approval by the competent body (the members’ meeting in a GmbH, the general meeting in an AG), as a rule within six months of the end of the financial year.
Resolution on profit: the meeting decides how to allocate the result — to reserves, carried forward or distributed. Remember that dividends are subject to a 35% withholding tax.
Retention: the annual accounts and supporting documents must be kept for ten years, in paper or electronic form provided they remain intact and legible.

If the company is subject to an audit, the accounts must be submitted to the auditors before approval.

Preparing during the year, not in December

The closing is all the faster the more tidily the ongoing bookkeeping has been kept. Regular bank reconciliations, VAT reported on time, supporting documents filed as you go: those who work this way reach the closing with few adjusting entries left to make. Those who put everything off until year-end find themselves reconstructing twelve months in a few weeks, with higher costs and a greater risk of error.

How we work

At SIH ONE, ongoing bookkeeping is pre-processed by our AI systems throughout the year and validated by a licensed professional, so we reach the closing with the accounts already reconciled. We handle adjusting entries, valuations and notes in accordance with the CO, coordinate any audit and prepare the documentation for approval by the meeting and for the tax return.

Do you want a year-end closing with no surprises? Let’s organise it together.