Year-End – Are You Ready for Your CPA?

By Sabeen Khan

Year-end procedures are extremely important for accurate accounting. With 2014 coming to a close it’s a good time to prepare the data that will be used to complete your year-end tax returns and reporting.

QuickBooks has a very good and detailed year-end guide in many of the versions of the software (from the Help Menu choose Year-End Guide). The guide is a checklist that provides links to the instructions and information that you may need for each item on the list.

Regardless of the software you are using, below are some tips and tricks to help you prepare for your year-end. Thinking about them now can alleviate some of the pressure that may occur in January.

Prior year adjusting entries: Confirm all outside CPA prior year adjusting entries have been entered and that balances agree to the prior year tax return or issued reports.

Review your Balance Sheet and Profit & Loss compared to the prior year: Compare the two year balances and ask the important question “Does this make sense?”

Reconcile Bank and Credit Card Accounts: Review your bank reconciliation for outstanding checks and deposits. Research old outstanding checks (outstanding over 2-3 months) that have not cleared the bank. You might need to void and reissue checks that have been lost or issued incorrectly. Research deposits that haven’t cleared the bank and make any necessary adjustments.

Petty Cash: Record expenditures for petty cash. Verify the petty cash balance with actual cash in the office and that you have receipts for the expenditures.

Accounts Receivable: Review customer accounts for accuracy and balances that is past due to determine if they are collectible or should be written off and classified as bad debt expenses for tax purposes. Apply open customer credits to outstanding invoices.

Fixed Assets: Add as much detail in QuickBooks as possible in the name, description and memo boxes.
Review additions to fixed assets for any items than can be expensed in accordance with your capitalization policy.

Loan Balances: Verify the loan balances on your Balance Sheet to the ending balances on the year-end loan statements. Confirm year-end interest expense agrees to interest expense on your Profit & Loss.

Accounts Payable and Vendors: Review vendor accounts for accuracy and balances that are past due. Apply any open credits to outstanding invoices.

Payroll tax liabilities: Confirm balances at year-end. Research and confirm tax payments that are due are remitted timely to the appropriate taxing authority.

Closing the year: We’re often asked how to “close” the year in QuickBooks. QuickBooks doesn’t have a standard year-end close feature, but it does have a close that will prevent accidental or intentional entries to prior periods. Once the taxes are complete and prior year adjusting entries are made, the prior year data should not be adjusted. The best way to ensure this does not happen accidently, is by setting a closing date. Once a closing date is set, anyone attempting to make changes to the date through which the books are closed will be required to input the password.

Archive and backup your data: Regular back-ups are imperative. If your system is not backed up to the cloud these back-ups should be made and stored off-site – for example in a safety deposit box or other secure location. Please don’t backup on the same hard drive as your data file – they need to be moved from your operations area. Hopefully, you will never need them; however, they are very inexpensive insurance in case something tragic happens to your hard drive or your office area.

Implementing these strategies over time will ensure accurate financial information. If you need any QuickBooks or accounting software assistance, please do not hesitate to call us.