Closing your books at the end of the year is a routine task, and a sound bookkeeping system makes the process pretty basic. Subjecting to your company, the closing process comprises the year’s transactions, ensuring that they are all appropriately categorized. Adjusting entries for company activities must be done and 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. These highlight balances 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. Mainly, 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 bookkeeping software, double-check all of the numbers. The best way to ensure that your bank accounts are reconciled properly is to hire an adept team of experts to make the entire process easier and eliminate the possibility of costly mistakes.
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 reconcile the year’s expenses. 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. Outside of issues with the IRS, improperly reported expenses and incorrect statements could put you or your business in a financial bind that will be challenging to overcome.
Furthermore, your income statements need to be carefully studied to guarantee that everything is categorized fittingly. If the classification is troubling you or 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 sure that all sent invoices have been reimbursed. It can be easy for an invoice to go unnoticed among so many year-end tasks, resulting in an over or understatement of accounts and cause strain at the last minute. Therefore, it’s essential to keep track of all of the small details without any negligence. Also, ensure that all of your revenues are recorded in the defined period.
Fixed Assets and Depreciation Expenses
If you have made any big 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 require professional services.
You will also have to run a taxable sales report to confirm that you have paid all of your sales taxes. Ensure that you do not neglect any of the above mentioned basic tasks because it can land you in serious trouble with the IRS.
Closing out the year for a business can be stressful. Multiple tasks need to be performed to ensure everything is prepared for the next year. Bookkeeping will ensure that from a financial standpoint, your business functioning at the highest level possible.
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