Closing the books at the end of the year is a simple activity, and a good accounting system makes the whole process fairly basic. Subject to your business, the closing procedure involves yearly payments, ensuring that they are all properly classified. Making adjustments of the entries for the operation of the firm must be done together with the search for errors or missing details in the results.
New companies that close their first year frequently face major obstacles at the time of closure due to their ineptitude. However, adhering to the basics of the closing phase will guarantee that everything goes smoothly. More significantly, closing the books helps you to properly account for the company’s financial activities over the year, show the balances that will be carried forward to the coming year, and detail the financial results for the coming year. Here are some basics that will help you close at the end of the year.
Closing your Books – Year-End Checklist
Reconcile your Bank Account
The balance on all your books must be equivalent to your year-end statements. In particular, once you have recorded all of your figures by hand, it should be checked that all financial records, credit cards and money accounts are precisely reconciled. And if you’re using a payroll app, recheck all figures. The easiest way to ensure that your bank accounts are correctly reconciled is to employ an expert team of professionals who can make the whole process much simpler for you.
Review Payroll Expenses and Income Statements
When you close your accounts, you must ensure that your quarterly and year-end payroll costs match each other. You would need to approve this before filing the annual IRS Form 940 and to compare the expenditure for the year. You must be very vigilant when managing payroll costs since it is government money that you are assigned to keep till the end of the year when taxes are filed. You could land in deep trouble with the IRS if your payroll expenses are not being managed correctly. Also, the financial reports have to be done carefully to ensure that it is correctly classified.
Estimate Accounts Receivable and Invoices
Ensure that you have cleared your invoices for the year and make sure that all invoices submitted have been compensated. It can be possible for the invoice to go unnoticed by too many year-end projects, which may result in over-or under-statement of payments and trigger pressure at the last minute. It is, therefore, crucial to be aware of all the small information without any incompetence. Also, make sure that all of your sales are reported within the given period.
Fixed Assets and Depreciation Expenses
If you have made some heavy acquisitions of capital assets in the past year, they must be compensated in your financial statements. Check the current inventory of fixed assets to see the specifics of sales, disposition or depreciation as necessary. Depreciation problems when you close your books can be a tricky process which will offer specialized services.
You will have to send a taxable sales report stating that you have paid all taxes on all of your sales. Make sure that you do not overlook any of the simple tasks listed above because they can cause you serious problems with the IRS.
