Learn in the textbookCorporate Governance and Disclosure
DefinitionSettlement of accounts (決算) is the procedure of closing out the records of transactions for one accounting period and summarizing that period's operating results and the end-of-period financial position in documents.
ExplanationThe day that marks the end of an accounting period is the closing date (決算日), and most companies treat one year as one period. The balance sheet (貸借対照表) prepared at settlement shows the financial position at period end, while the income statement (損益計算書) shows how much profit was made during the period. The results of settlement form the basis for dividends to shareholders and for the next period's plans.
AnalogyIt is like closing a household account book at year end. You total a full year of income and spending and pin down how much is left and how much you have saved.
Memory hookThink of settlement as settling the numbers. The figures that kept moving during the period are fixed and finalized here.