Ashadh 31 is not just a date on the calendar for Nepali businesses - it is the hard deadline that determines whether your financial year ends cleanly or with months of unresolved reconciliation work carrying into the new year. For accountants at trading companies, construction firms, schools, and service businesses across Nepal, the weeks approaching fiscal year end Nepal are among the most pressured of the year. Transactions need to be cut off, provisions made, reconciliations cleared, and records prepared for an audit that may come months later.
The gap between a business that closes its Ashadh accounts in two weeks and one that is still untangling them in Kartik is almost entirely a question of preparation and discipline throughout the year - and a clear checklist for the closing process itself. This article provides that checklist: what to complete before 31 Ashadh, what entries need to be posted at year-end, and what audit-preparedness looks like before you hand records over to your auditors.
Whether your business uses an accounting system or still manages records manually, these steps apply. The difference is in how long each step takes - and how confident you are in the numbers when you are done.
Pre-Closing Reconciliations - Clear These Before 31 Ashadh
Bank reconciliation is the foundation of every year-end close. Every bank account your business holds must be reconciled to its Ashadh 31 statement. Outstanding cheques, deposits in transit, bank charges, and interest must all be identified and either cleared or accounted for. Any difference between your accounting records and the bank statement that cannot be explained is an error - find it before year-end, not during audit.
Receivables reconciliation comes next. Print your full debtors list as at 31 Ashadh. For each outstanding balance, confirm that the amount is real, the customer acknowledges the debt, and there is no dispute. Balances that are more than 120 days old require scrutiny - either confirm collectability or make provision for doubtful debts. Old receivables sitting in the books unaddressed are a common audit query and a source of inflated assets on the balance sheet.
Nepal's IRD requires businesses to maintain books and records for at least seven years from the end of the fiscal year. This means year-end accounts must not only be numerically correct but also supported by source documents - invoices, receipts, contracts, bank statements - that can be produced during an audit at any point within that window. Businesses that do not archive source documents alongside their accounting records face serious difficulties when the IRD requests documentation years after the fact.
Payables reconciliation follows the same logic in reverse. Confirm every outstanding payable with supplier statements. Goods received before 31 Ashadh but not yet invoiced need an accrual - omitting these understates both expenses and liabilities. Inter-company balances must also be reconciled: if your business has related companies, the amount payable to one must equal the amount receivable in the other. Year-end is when mismatches in inter-company balances become visible and must be resolved.
Bank, receivables, and payables reconciliation are the three non-negotiable pre-closing steps. Unresolved differences in any of these three areas will surface during audit and are much harder to investigate after year-end when documents are less fresh and staff have moved on to new-year work.
Year-End Accounting Entries - What Must Be Posted Before Closing
Depreciation for the full fiscal year must be calculated and posted before year-end close. Fixed assets purchased during the year should have pro-rated depreciation based on the number of months in service. Nepal allows both declining balance and straight-line methods - the method chosen must be consistent year over year. Asset additions, disposals, and fully depreciated assets must all be reflected in the fixed asset register before the depreciation journal is posted.
Prepayments and accruals require particular attention. Any expense paid in advance that extends beyond 31 Ashadh - annual insurance premiums, rent paid in advance, software subscriptions - must be deferred. Conversely, expenses incurred before year-end but not yet invoiced - electricity used in Ashadh but billed in Shrawan, audit fees, and year-end bonus provisions - must be accrued. Both directions matter equally: missing either understates or overstates the year's profit.
Inventory count is a critical year-end step that many businesses treat as optional. Your accounting system's stock balance must match the physical count as at 31 Ashadh. Counting discrepancies - whether from pilferage, damage, or posting errors throughout the year - must be investigated and written off before the year is closed. Carrying an unreconciled inventory discrepancy into the new year means starting the new year with incorrect stock values that compound forward.
Tax provisions complete the year-end entries. Calculate your estimated income tax liability for the year based on taxable profit after allowable deductions. Advance tax payments made during the year offset this liability, but the balance must be provided for. SSF and TDS liabilities that remain outstanding as at 31 Ashadh must also appear in the balance sheet. Getting the tax provision wrong means your auditors will adjust it during their work - better to calculate it yourself with care.
Year-end journals - depreciation, prepayments, accruals, inventory adjustments, and tax provisions - determine the accuracy of your final P&L and balance sheet. Each one must be posted before the year is closed. Skipping any of them creates audit adjustments that reopen the year.
Post-Closing Trial Balance Review Before Audit Handover
Once all reconciliations are done and year-end entries are posted, print the post-closing trial balance and review it before calling the year closed. Check that every balance makes sense: debtors should not include credit balances that belong on creditors, bank accounts should not have unexplained overdrafts, and expense accounts should not contain asset purchases. Unusual balances at this stage are easier to fix now than after the audit has started.
Review the P&L against prior year and against budget if one exists. Large variances in any line item need an explanation. Not only does this prepare you for audit queries, it also gives management the narrative they need to explain the year's performance to the board or investors. An accountant who can walk through the P&L variance analysis confidently is worth far more to the business than one who can only produce the numbers without context.
Prepare your audit file before the auditors arrive. This means organising bank reconciliation statements, supplier confirmation letters, fixed asset schedules with supporting purchase invoices, payroll summaries, tax computation, and a schedule of provisions and accruals with supporting calculations. Auditors who receive a well-organised file complete their work faster and raise fewer queries - both of which reduce the cost and disruption of the annual audit.
A post-closing review and pre-prepared audit file are the final steps that separate businesses that close cleanly from those that spend months answering auditor queries. Thirty minutes of trial balance review before handover can save days of back-and-forth after the audit starts.
IRD Submission Timeline After Year-End
After the Ashadh 31 year-end, Nepali businesses face a series of IRD submission deadlines. The income tax return for companies must be filed within three months of the fiscal year end - that is, by Ashwin 31. The return requires audited financial statements in most cases, which means getting the audit completed within that window. Businesses that start audit preparation late in Shrawan face a very tight timeline to complete the audit and file the return by Ashwin 31.
Annual TDS returns must also be submitted, reconciling the monthly TDS deposits made throughout the year against the total TDS deducted per payment category. Discrepancies between monthly TDS deposits and the annual return can trigger IRD reassessments, so the annual reconciliation needs to be thorough. Keep copies of all monthly TDS challans as they are required documents when filing the annual return.
Businesses that take advance tax credit for the current year must also ensure their advance tax computations are accurate. Overpaid advance tax generates a refund that businesses are entitled to claim, but under-calculation of advance tax during the year results in interest charges. Getting the advance tax right requires a mid-year profit estimation - another reason why real-time accounting data throughout the year makes year-end significantly less stressful.
The 90 days after Ashadh 31 are among the most deadline-dense in Nepal's tax calendar. Businesses that close their books quickly and start audit preparation early avoid the compounded stress of simultaneous audit, tax filing, and new-year operations.
Frequently Asked Questions
Companies registered in Nepal must file their income tax return within three months of the end of the fiscal year - that is, by Ashwin 31 (approximately mid-October). The return requires audited financial statements for most companies. Businesses that need additional time can apply to the IRD for an extension, but extensions are not guaranteed and interest on any tax payable runs from the original due date.
There is no specific statutory requirement mandating a physical count, but auditing standards require that auditors verify the existence and completeness of inventory. Most auditors will request evidence of a physical count performed close to year-end - particularly for trading and manufacturing businesses where inventory is a material balance sheet item. A business that cannot demonstrate a physical count will face additional audit procedures and potential qualification of the audit opinion.
Nepal's advance income tax is typically paid in three instalments during the fiscal year. The first instalment covers approximately 40% of the estimated annual tax, due in the first quarter. The second instalment covers another 40%, due in the third quarter. A final instalment covers the remaining 20%, due in the fourth quarter. Calculations are based on the prior year's tax liability or the current year's estimated profit. Underpayment of advance tax attracts interest at the prescribed IRD rate.
Year-End Ready Every Day - Not Just on 31 Ashadh
MISAC is built on the accounting-first principle - every transaction, from the moment it is entered, generates a complete double-entry journal with Nepal's fiscal year native to the system. Bikram Sambat dates, Shrawan-to-Ashadh fiscal year boundaries, and IRD-format registers are not adaptations - they are the default. When Ashadh 31 arrives, the books are not being assembled for the first time. They are current, reconciled, and ready to close.
The Nepal compliance built into MISAC means IRD-format VAT registers, TDS per-heading registers with IRD codes, and SSF contribution records are maintained throughout the year in the exact format regulators expect. At year-end, the compliance package is already prepared. Bank reconciliation uses imported bank statements matched line-by-line. Fixed asset depreciation schedules post at year-end in one step. Physical stock count variance journals post directly from the count module. The audit file - vouchers, source documents, schedules - is printable on demand.
Businesses that manage their accounts on MISAC consistently report that year-end closing takes days rather than weeks, and audit preparation is a matter of printing pre-organised schedules rather than building them from scratch. MISAC Intelligence Pvt. Ltd. has guided Nepali businesses through dozens of fiscal year-end closings and built those lessons directly into the system's workflow.
Ready to See MISAC in Action?
If Ashadh year-end is your most stressful period, talk to us about how MISAC turns closing the books into a predictable, manageable process.