Closing the year
The last close of the year counts the stock, puts every peso in the right year, and ends with two January deadlines: registering the books and the inventory list.
← 6.8 Annual return and eAFS31 December
Kuting Kitchen closes its books every month (Lesson 3.6). The last close of the year does more: it counts the stock, fixes what the monthly closes left open, closes the year's accounts, and produces the financial statements the auditor and BIR will see.
Then two BIR deadlines in January: registering the year's books and the inventory list. We'll build the checklist one job at a time.
Count the stock
On the last day of the year, count what's actually on the shelves. Say the books show ₱250,000 of cat food, and the count finds ₱244,000: ₱6,000 expired or got damaged.
Which one is right? The count. The books get corrected to match, and the same count becomes the inventory list BIR wants in January.
Adjusting entries
Adjusting entries put each peso in the year it belongs to, whenever the bill arrives or the money moves. They go in the general journal (Lesson 3.3).
| Item | Belongs to |
|---|---|
| ₱6,000 of stock lost | 2026 expense |
| December electricity, billed in January | 2026 expense |
| Ads paid in December for January | 2027 expense |
| Warehouse shelving | Each year's share, as depreciation |
Closing entries
Income and expense accounts only cover one year. Closing entries empty them into retained earnings, so sales, cost of sales, rent and salaries all start 2027 at zero.
Does everything reset? No. What the business owns and owes (cash, stock, payables) carries over into the new year unchanged.
The financial statements
From the closed books come the balance sheet and income statement. Kuting Kitchen sells more than ₱3 million a year, so they go to an independent CPA for audit before they're attached to the annual return (Lesson 6.8).
Register the year's books, through ORUS
Since RMC 4-2026, the year's books are registered online through ORUS (BIR's Online Registration and Update System). Stamping at the RDO is only for when ORUS is down.
| Loose-leaf | Computerized | |
|---|---|---|
| What | Printed pages, bound | Kept in software |
| Deadline | 15 days: 15 Jan 2027 | 30 days: 1 Feb 2027 |
| QR code stamp | On page 1 | Printed and kept |
Thirty days lands on Saturday 30 January, so it moves to Monday. For 2025 books BIR gave extra time; don't count on that again.
The inventory list
Businesses that carry stock submit an inventory list within 30 days after the year ends, the same date as computerized books. Kuting Kitchen's is the 31 December count.
Ask your RDO how they want it submitted.
Then the year's filings
With the books closed and registered, the rest of the year-end follows from them: the annual return by 15 April and its attachments through eAFS (Lesson 6.8), then the financial statements with SEC (Lesson 6.10).
Pop Quiz: adjust or not?
At the 2026 close, which of these needs an adjusting entry? Kuting Kitchen records sales and bills when the invoice is issued or received.
Adjust. The count wins; the ₱6,000 loss is a 2026 expense.
No entry. It is already in December's books, in the right year.
Adjust. The power was used in 2026, so it's a 2026 expense, owed at year end.
Adjust. It's paid in advance; the expense belongs to 2027.
No entry. The sale and the payout are already in December's books.
Adjust. This year's share of its cost is booked as depreciation.
General information for learning, not tax advice. Kuting Kitchen and its stock figures are fictional. Book registration deadlines from RMC 4-2026; dates that fall on a weekend move to the next working day. Your RDO has the final word on what applies to you.
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