Closing your books at the end of the year is a customary task and a good bookkeeping system makes the process pretty basic. Subjecting to your company, the closing process comprises of the year’s transactions, ensuring that they are all appropriately categorized. Adjusting entries for company activities must be done along with searching for errors or missing information in the data.
New businesses closing their first year often face significant challenges at the time of closing because of their inexperience. However, adhering to the basics of the closing process will ensure that everything works out smoothly. More prominently, closing your books allows you to precisely account for your company’s financial doings from the year, highlight balances that will carry forward to the upcoming year, and create the outline for the next year’s financial reports. Here are a few basics that will help you close out at the year end.
Closing your Books – Year End Checklist
Reconcile your Bank Account
The balance on all of your books should be equal to your year end statements. Particularly, if you have been entering all of your numbers by hand, it must be ensured that all bank statements, credit cards, and money accounts are accurately reconciled. Even if you use a bookkeeping software, double check all of the numbers. The best way to endorse that your bank accounts are reconciled properly is to hire an adept team of experts that will make the entire process a whole lot easier for you.
Review Payroll Expenses and Income Statements
When closing your books, you must ensure that your monthly and year end payroll expenses match each other. You will need to approve this before filing the annual IRS Form 940 and to reconcile the expenses for the year. You must be very careful with handling payroll expenses as it is the government’s money that you are assigned to hold until the year end when taxes are filed. You could land in serious trouble with the IRS if your payroll expenses are not handled correctly.
Furthermore, your income statements need to be carefully studied to guarantee that everything is categorized fittingly. If the classification is troubling you or if you’re unsure about your payroll taxes, it is best to seek professional help as they have the right team with a voracious approach towards this task.
Evaluate Accounts Receivable and Invoices
Guarantee that you have cleared your year end invoices and make certain that all sent invoices have been remunerated. It can be easy for an invoice to go unnoticed among so many year end tasks, which can result in an over or understatement of accounts and cause strain at the last minute. Therefore, it’s important to keep track of all of the small details without any negligence. Also, ensure that all of your revenues are recorded in the defined time period.
Fixed Assets and Depreciation Expenses
If you have made any hefty fixed asset purchases this past year, they must be accounted for in your balance sheets. Check your current fixed asset inventory and look into the minutiae of sales, disposal, or depreciation as fitting. Tackling issues related to depreciation when closing your books can be a tricky task and would require professional services.
You will also have to run a taxable sales report which will confirm that you have paid all of the taxes on all of your sales. Ensure that you do not neglect any of the above mentioned basic tasks because it can land you in serious trouble with the IRS.
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