The year-end procedure is a simple approach to conclude your accounts for a fiscal year and generate your profit and loss statement. Balance sheet and account sometimes referred to as a "statement of financial situation" Before we begin, it's worth noting that all year-end transactions are made in the home currency. So, if you are operating within Europe, then all European currencies are converted into euros before any calculations are done. When preparing your annual report, you will need to include a balance sheet and an income statement. The balance sheet shows the state of affairs at the end of the accounting period; the income statement reports on the performance of the business over the period. The balance sheet displays the value of assets and liabilities at the end of the reporting period. Assets consist of anything of value owned by the company. These could be physical items such as buildings or machinery, or they could be intangible assets such as brand name recognition or client relationships. Liabilities are the obligations of the company to others. For example, debts such as loans or bills that need to be paid over time with interest. Equity refers to the ownership share of the company available for distribution or sale. This is usually shown as total shareholders' equity on the balance sheet. Income statement details what happened to the business over the period. It provides information on sales, expenses, profits/losses, and the change in equity.