Start the New Year Stress-Free: Your End-of-Year Accounting ...

Start the New Year Stress-Free: Your End-of-Year Accounting Checklist: https://westtoeastllc.com/blog/end-of-year-accounting-checklist...

Closing the books at year-end is an essential accounting task every business must undertake. The purpose of closing the books is to prepare accurate financial statements that summarize the business's performance and financial position. Having reliable financial statements helps business owners to make informed decisions, manage cash flow, secure financing, and assess the overall health of the business.

Closing the books involves:

· Gathering year-end financial documents

· Reconciling accounts

· Recording final revenue and expense transactions

· Running a trial balance

· Adjusting entries

· Updating the general ledger

· Preparing the final financial statements

· Close Revenue and expense accounts

Preparation and organization are essential - waiting until the last minute can unnecessarily complicate matters. The accounting team should allow sufficient lead time to collect financial information, follow up on discrepancies, and record transactions properly. With the right systems and procedures in place, businesses can close their books efficiently and emerge with financial statements ready for review and analysis, and not to mention tax season!

While closing the books may seem like a daunting year-end chore, approaching it systematically step-by-step makes it manageable. Please feel free to call us with any questions (602) 821-7516.

Gather Financial Documents

The first step in closing the books at year-end is gathering all of the financial documents for the period. It includes locating any bank statements, credit card statements, receipts, invoices, bills, and other documentation showing financial transactions that occurred during the year.

Collect bank statements for all business accounts, including checking, savings, and investment or money market accounts. Check online banking portals and download the monthly statements. Gather any paper copies of bank statements as well, if applicable.

For credit cards used for business expenses, collect the monthly statements. Depending on the number of cards used, set up files or binders for storing these statements. Having them organized will help with the next steps of reconciling accounts and recording expenses.

Obtain all receipts and invoices for expenses paid in cash, by check, or by debit/credit card. These are needed to have accurate records of payments to deduct. Make copies or scans of receipts to have both a physical and digital record. Double-check that all expenses have corresponding documentation.

Also, gather any bills, invoices, or documentation showing amounts owed by customers for services or products provided by the business. These will come into play when recording revenue for the period.

Having all these financial documents collected and organized is crucial to ensure all transactions are accounted for properly when closing out the year. It lays the groundwork for the remaining steps in the year-end close process.

Reconcile Accounts

Reconciling accounts is a critical step in the year-end closing process. It involves reviewing all balance sheet accounts and ensuring the balances match the source documents.

The key accounts to reconcile include:

Bank Accounts

For each bank account, pull the final bank statement for the year. Compare the balance on the statement to that in your accounting records. If any outstanding checks or deposits are in transit, adjust the book balance accordingly until it matches the bank statement.

Investigate any discrepancies and determine if adjustments are needed. Common reconciling items include bank fees, automatic withdrawals, interest earned, or deposits recorded incorrectly.

Credit Cards

Obtain the credit card statements for all business cards. Match up charges and payments on the statement to the entries in your books. Make any necessary adjustments.

Calculate the balance due and ensure it aligns with the credit card company's records. Take into account any payments or charges made since the statement closing date.

Accounts Receivable

Generate an aged accounts receivable report. Verify that open invoices match outstanding balances owed by each customer.

Follow up on any past-due accounts, disputed charges, or discrepancies. Write off any uncollectible accounts.

Accounts Payable

Print an accounts payable aging report. Confirm the balances and due dates match vendor records.

Investigate any differences and determine if adjustments are needed for things like finance charges, payments sent but not applied, etc. Add new payables for recently received invoices.

By thoroughly reconciling each account, you can identify and resolve any discrepancies before closing out the year's books. It provides assurance that all transactions are properly recorded.