In brief: The annual closing of accounts is the process by which a company finalises its accounts at the end of the fiscal year. In Morocco, it comprises five main stages: preparatory work (account reconciliation, bank reconciliation, physical inventory), adjusting entries, determination of taxable income, preparation of financial statements within 3 months of year-end, and post-closing formalities (AGM, filing with the registry, tax returns). A well-structured process ensures the reliability of the accounts and compliance with legal obligations.
Step 1 — Preparatory Work
Preparatory work forms the foundation of the closing process. It aims to verify the reliability and completeness of accounting entries before proceeding with inventory adjustments.
Account Reconciliation (Lettrage)
Account reconciliation consists of matching invoices with their corresponding payments in customer and supplier accounts. Each invoice must be associated with its payment. Unreconciled entries at the closing date help identify:
- Unpaid receivables requiring follow-up or an impairment provision
- Outstanding supplier payables
- Uncleared advances and deposits
- Posting errors to be corrected
Reconciliation must be performed for all significant third-party accounts: customers (3421), suppliers (4411), personnel (4432), social security bodies (4441), government (345x/445x).
Bank Reconciliation
The bank reconciliation statement allows the balance of the bank account in the books to be reconciled with the balance on the bank statement. Discrepancies arise from transactions in transit:
- Cheques issued but not yet presented for clearing
- Transfers received but not yet recorded
- Bank charges and interest not yet posted
- Banking or accounting errors
Each discrepancy must be explained and missing transactions must be recorded. The bank reconciliation is an essential working document in the closing file.
Physical Inventory of Inventories and Fixed Assets
The year-end physical inventory is a legal obligation under Law 9-88. It covers all of the company’s physical assets:
- Inventories: goods, raw materials, work in progress, finished products
- Tangible assets: verification of the existence and condition of assets recorded in the fixed asset register
The inventory must be carried out at the closing date or at a date close to it, with tracking of intervening movements. Discrepancies between the physical inventory and the accounts must be analysed and adjusted.
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Step 2 — Adjusting Entries
Adjusting entries ensure compliance with the accruals principle (matching principle) established by the CGNC. They allocate expenses and income to the fiscal year to which they economically relate.
The detailed treatment of each category of entries is covered in our guide on year-end adjusting entries. Here is a summary.
Accrued Expenses and Accrued Income
- Accrued expenses: recognition of expenses incurred in year N for which the invoice has not yet been received (account 4417 — Suppliers, invoices not yet received)
- Accrued income: recognition of income earned in year N for which the invoice has not yet been issued (account 3427 — Customers, invoices to be issued)
Prepaid Expenses and Deferred Income
- Prepaid expenses (CCA): neutralisation of the portion of expenses recorded in year N but relating to year N+1 (account 3491)
- Deferred income (PCA): neutralisation of the portion of income recorded in year N but relating to year N+1 (account 4491)
Depreciation Charges
Depreciation charges are calculated according to the depreciation schedule defined for each fixed asset. The calculation is pro rata temporis for assets acquired or disposed of during the year. See our guide on accounting depreciation in Morocco.
Provisions
Accounting provisions must be reviewed at year-end:
- Impairment provisions: doubtful receivables, obsolete inventories, securities in unrealised loss position
- Provisions for risks and charges: pending litigation, warranties given, probable future expenses
- Reversal of provisions that are no longer required
Inventory Adjustments
- Cancellation of opening inventory (debit 6114 / credit 3111)
- Recognition of closing inventory from the physical count (debit 3111 / credit 6114)
Translation Differences
Revaluation at closing rate of foreign currency receivables and payables, with recognition of translation differences — asset (mandatory provision) and liability.
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Step 3 — Determination of the Result
From Accounting Result to Taxable Income
The accounting result from the post-inventory trial balance does not correspond to the taxable income used as the basis for calculating tax. The transition from accounting result to taxable income is performed through a reconciliation table comprising:
Add-backs (expenses recorded but not deductible for tax purposes):
- Fines and penalties
- Donations and gifts exceeding legal limits
- Excess or non-compliant depreciation
- Non-deductible provisions
- Unjustified or personal expenses
- Portion of expenses relating to passenger vehicles exceeding 400,000 MAD (VAT included)
Deductions (income recorded but not taxable or already taxed):
- Dividends received (100% exemption between Moroccan companies)
- Capital gains on disposal of equity investments (exemption subject to conditions)
- Reversals of provisions previously added back
Corporate Tax Calculation
Taxable income serves as the basis for calculating corporate tax according to the applicable proportional rate schedule. Since the progressive IS reform, rates are determined based on the amount of net profit. The minimum contribution (0.25% or 0.15% of revenue, depending on the case) constitutes a minimum tax even in the event of a loss.
Details of deductible expenses for corporate tax and deductible provisions are covered in dedicated guides.
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Step 4 — Preparation of Financial Statements
Financial statements must be prepared within a maximum of 3 months after the year-end, in accordance with Law 9-88.
Standard Model (Revenue > 10 million MAD)
The standard model comprises five mandatory statements:
- Balance sheet (assets and liabilities)
- Income statement (CPC)
- Statement of management balances (ESG)
- Funding table (TF)
- Supplementary information statement (ETIC)
Simplified Model (Revenue ≤ 10 million MAD)
The simplified model comprises only two mandatory statements:
- Simplified balance sheet
- Simplified CPC
The detailed presentation of each statement is developed in our guide on financial statements in Morocco.
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Step 5 — Post-Closing Formalities
Ordinary General Meeting (AGM)
The AGM for approval of accounts must be held within 6 months of the year-end, i.e. before 30 June for a year ending on 31 December. The agenda includes:
- Presentation and approval of the annual accounts
- Appropriation of the result (legal reserve, dividends, retained earnings)
- Discharge of directors
- Where applicable, renewal of the auditor’s mandate
Filing with the Commercial Court Registry
The approved financial statements must be filed with the commercial court registry within 30 days of the approval AGM. This filing is mandatory for commercial companies (SA, SARL, SNC).
Tax Returns
| Return | Deadline | Platform |
|---|---|---|
| Corporate tax return (IS) | 3 months after year-end (31 March for a 31/12 year-end) | SIMPL |
| Individual income tax return (IR — BIC/BNR) | Before 1 April | SIMPL |
| Tax package (balance sheet, CPC, supplementary schedules) | Attached to the return | SIMPL |
| Form 9421 (payments to third parties) | 31 March | SIMPL |
All tax returns must be filed electronically via the SIMPL platform of the DGI.
Appropriation of the Result
The appropriation of the result as decided by the AGM is recorded as follows:
- Allocation to the legal reserve: 5% of net income until the reserve reaches 20% of share capital
- Distribution of dividends: after allocation to the legal reserve and deduction of any accumulated losses
- Retained earnings: unallocated balance carried forward to the next fiscal year
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Common Mistakes to Avoid
The practice of annual closings in Morocco reveals several recurring errors that every chartered accountant should monitor.
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Omission of accrued expenses: failing to recognise invoices not yet received for services rendered in year N distorts the result and the tax base.
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Inadequate or excessive provisions: provisions must be evaluated reasonably and with supporting documentation. Excessive provisions artificially reduce the result. Inadequate provisions overstate the result.
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Failure to adjust prepaid/deferred items: overlooking prepaid expenses and deferred income is frequent, particularly for insurance, rent and subscriptions.
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Incomplete bank reconciliation: unexplained discrepancies between the books and the bank may conceal errors or fraud.
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Late formalities: non-compliance with legal deadlines (registry filing, tax returns) triggers penalties and surcharges.
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Absence of physical inventory: the lack of a physical inventory of inventories and fixed assets constitutes a serious irregularity that may justify a qualification by the auditor.
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Confusion between accounting result and taxable income: the transition between the two via the reconciliation table of add-backs and deductions is an essential step that some SMEs neglect.
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Insufficient documentation: each adjusting entry must be supported by a working paper. The retention of the closing file is essential for audit and tax audit purposes.
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FAQ — Annual Closing of Accounts in Morocco
What is the deadline for preparing the annual accounts?
Financial statements must be prepared within 3 months of the year-end (Art. 18 of Law 9-88). For a year ending on 31 December, the accounts must therefore be finalised by 31 March of the following year at the latest.
What happens if the AGM is not held within 6 months?
Failure to hold the AGM within the 6-month deadline constitutes an irregularity that may be sanctioned. Any shareholder may apply to the courts for the appointment of an agent to convene the meeting. In practice, accounts may be approved late, but late payment penalties on tax returns remain due.
Is a 31 December year-end mandatory?
No. The fiscal year may end on any date. However, the vast majority of Moroccan companies close on 31 December. A non-calendar year-end (for example, 30 June) is possible and may offer advantages for certain seasonal activities. The first fiscal year may be shorter or longer than 12 months.
What are the penalties for failing to file accounts with the registry?
The Code de Commerce provides for penalties in the event of non-filing. In practice, penalties are rarely enforced, but non-filing can cause problems when seeking bank financing, tendering for public contracts or transferring shares.
Can accounts be modified after AGM approval?
In principle, accounts approved by the AGM are final. However, if a significant error is discovered after approval, a correction may be made in the fiscal year in which the error is discovered (prospective method). Annulment of the AGM resolution is possible only in exceptional cases and through court proceedings.
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