One of the things that you will need to do for your business at the end of the year is to close the books. If they have been kept up with the accounting practices throughout the preceding months, this shouldn’t be too difficult to accomplish. However, there are still some extra things that need to be done at year-end. We’ve put together an end of the year accounting checklist to help keep your business on track.

Get Organized

If you haven’t been using an accounting software to organize your receipts, this may be a good time to start. Even if your business is still not ready to take the plunge, getting organized with your paper trail at the end of the year is an important exercise so that the expenses are well-documented.

Reconcile Bank Accounts 

Reconcile bank accounts to make sure that what you are entering on financial statements and ledgers matches up with your accounts and credit card statements. If they don’t match up, figure out where the error occurred and look for missing or duplicate transactions. Variances affect the financial statements. Most accounting software can do this for you automatically.

Profit & Loss Statements

Review your business’ profit and loss statements to ensure that everything makes sense and that items are categorized properly. Many accounting programs will automate this categorization for you, but it is your job to make sure that the items are put in the right place. One way to make sure things make since is to compare against last year’s profit and loss, any significant changes should be investigated.

Accounts Payable and Expenses

Confirm that all of the expenses have been paid and registered in your accounting system. There are many business expenses, such as cell phone and internet bills, that may be used as deductions on your business’ tax return. Gather the records on these types of expenses to provide to your tax accountant.The accounts payable should be reviewed to make sure all bills have been paid and all bills paid are recorded as paid.

Notes Payable

If there are any outstanding loans, be sure that the balances on the loan statements match up to 3rd party documents. Any discrepancies should either be corrected in the accounting program or resolved with the other party. Also, confirm that loans paid off during the year are removed and any new loans taken out are added.

Accounts Receivable and Invoices

Have you sent out and collected on all of the invoices that are due for the year? If not, round up what is still left so that the year-end receivables can be closed out. It is also important to take a look at past due receivables and determine whether or not they should be sent to collections or written off as a deduction.

Fill Out W-2s and 1099s

The IRS requires the reporting of annual income for full-time employees through a W-2 and certain independent contractors who earn at least $600 through a 1099. You will need to fill out these forms and submit them to the IRS and to the people who have worked for you by the January 31st. Be sure to review the IRS website rules when completing W-2’s and 1099’s.

Take Physical Inventory

If it applies to your business, you’ll want to take a year-end inventory so that it can be matched up to your balance sheet. This is also helpful in determining how much you have spent on inventory throughout the year and putting a current value on it for accounting purposes.

Fixed Assets

Review the fixed assets that are listed on your balance sheet. If any have been sold or disposed of over the year, make note of this. Also, be sure to record new purchases and verify the depreciation on fixed assets.

Payroll

Make sure that payroll expenses and tax liabilities that are registered for each month match up to your business’ year-end numbers or your payroll reports if you use a third party for payroll.

This end of the year accounting checklist is meant to give you a general idea of the items to take care of as December 31st approaches. If you have any questions, or when in doubt, you should seek the guidance of a professional, like Cheryl Jefferson & Associates, who is familiar with your particular business situation.