What is meant by year-end closing in SAP FI?

Year-end closing in SAP FI is a critical process that encapsulates finalizing all financial transactions for the fiscal year. This procedure ensures that all accounts are reconciled and accurately reflect the financial status of the organization at the year's end. It encompasses tasks such as closing ledgers, generating financial statements, and ensuring that all entries are properly accounted for before transitioning into the new fiscal year. This step is vital for providing an accurate view of the company's financial performance and position, setting the stage for the upcoming fiscal cycle.

The other options focus on parts of the financial management process but do not encompass the full scope of year-end closing. Starting the new fiscal year refers to the transition after closing all accounts, while recording expenses deals primarily with transaction entry rather than the closure and reconciliation of financial statements. Preparing budgets for the next year is a forward-looking process that occurs after year-end closing and is not a part of the closing procedures themselves.