Most companies follow either calendar year or financial year for leave accounting. Generally, grant, carry forward, encash or lapse of leave are against a leave year.
Once the leave year is completed and before its closure, all leave transactions for that year are to be completed. HR needs to compute the amount of leaves that need to be lapsed or carried forward to the next year and appropriately update the balances. Based on the company policy, employee may request for encashing their leaves. HR needs to facilitate this. New transactions are disallowed later for the closed year. Accounts team will need the balances of leave for each employee every month. This is to create a liability in the Books of accounts. HR needs to provide this information.
Next, a new leave year is created and as per leave policy, all or a portion of accumulated leaves will be carried forward to this new year. There could be lapse of certain leave types as well. The whole process is similar to a financial year end accounting and is termed as Leave Year/Period End Accounting.