Annual Financial Closing

A Simple Process, Accurate Results, and Complete User Comfort

The annual financial closing is one of the most critical accounting procedures, and in many traditional accounting systems it is often a source of stress and complexity. In Hinawi ERP, the annual closing process is designed to be simple, direct, and free of complications, because the system is built on a key principle:
correct accounting work is done throughout the year, not at the last day of it.

First: The Core Concept of Annual Closing in Hinawi ERP
In Hinawi ERP, the user does not need to perform complex actions at the end of the financial year.
There are no manual closing entries, no stressful posting procedures, and no last-minute calculations.

The system automatically performs the following:

• Carries forward all balance sheet account balances to the new financial year as they are.

• Fully closes all profit and loss accounts.

• Transfers the net result of the year (profit or loss) to Retained Earnings under Equity in the Balance Sheet.

In other words, when opening Profit and Loss reports in the new year:

• No balances appear on revenue accounts.

• No balances appear on cost or expense accounts.

• The new year starts with zero balances in the income statement, while the balance sheet continues normally.

Second: How Profit and Loss Accounts Are Closed
All profit and loss items, including:

• Revenues

• Cost of Sales

• Direct Expenses

• General and Administrative Expenses

are automatically closed and their net result is transferred to Retained Earnings under Equity in the Balance Sheet.

From this retained earnings balance, the user can later:

• Distribute profits to partners.

• Transfer amounts to reserves.

• Apply any other accounting treatment according to company policy.

These actions are performed through separate distribution entries in the new financial year, not as part of the closing process itself.

Third: Closing Date and Preventing Posting to Closed Years
One of the most important steps in Hinawi ERP is defining the Closing Date.
This date is used to prevent users from:

• Posting new transactions.

• Posting accounting entries.

• Modifying data that affects a closed financial year.

This ensures:

• Data integrity.

• Protection against changes after closing.

• Secure and reliable financial statements.

Fourth: Why No Year-End Closing Entries Are Required
In Hinawi ERP, accounting treatments are not postponed to year-end because:

• Provisions are calculated monthly.

• Prepaid expenses are allocated monthly.

• Fixed asset depreciation is calculated monthly.

• Deferred items and periodic adjustments are already processed during the year.

As a result, when year-end arrives:

• There are no surprises.

• No accumulated adjustments.

• No stressful last-minute work.

Fifth: What the User Must Do Before Closing the Year
Although the closing process itself is simple, there are essential checks that must be completed to ensure data accuracy. These checks are a professional responsibility and cannot be ignored.

1. Verify Posting of All Transactions
   The user must ensure that all transactions have been posted and have affected the general ledger.
   If batch posting is used, the user must:

• Review the batches.

• Approve them.

• Post them to accounting.

2. Verify Posting of All Provisions
   The user must confirm that:

• End-of-service provisions have been posted.

• All other provisions have been posted.
  This can be done easily with a single system action.

3. Review the Missing Data / Missing Procedures Report
   This report is one of the most important pre-closing reports. It identifies:

• Incomplete transactions.

• Unapproved procedures.

• Missing data that could impact financial results.

All issues in this report must be resolved, and no pending items should remain.

4. Review Key Financial Reports
   Before closing, the following reports must be reviewed:

• General Ledger

• Profit and Loss Statement

• Balance Sheet

Hinawi ERP provides a smart feature at the top of each report that highlights abnormal balances, such as:

• Debit-nature accounts showing credit balances.

• Credit-nature accounts showing debit balances.

This feature significantly helps in detecting errors quickly.

5. Match Analytical Reports with Account Balances
   It is essential to ensure full reconciliation between:

• Fixed Assets reports and their balances in the Trial Balance.

• Inventory reports and stock account balances.

• Deferred items, prepaid expenses, and depreciation reports with their respective ledger balances.

This reconciliation is a key auditing requirement, and Hinawi ERP greatly simplifies this process.

Sixth: Final Responsibility
Ultimately, the:

• Finance Manager

• or Chief Accountant

is the final person responsible for reviewing all these points, validating data accuracy, and approving the financial statements based on professional judgment.

Hinawi ERP provides the tools, alerts, reports, and automation—but the final professional responsibility remains with financial management.

Conclusion
Annual financial closing in Hinawi ERP is not a complicated procedure; it is the natural result of organized accounting work throughout the year.
The system operates continuously, closing is smooth, results are accurate, and auditing becomes easier—without stress or headaches.