Accounting Matters Blog

Year End Accounting Check List

It’s That Time AgainAccounting A La Carte

It’s that time of year again when most businesses are closing their books. The business owners are either celebrating or licking their wounds. In any event, we as accountants usually have some clean-up and decision making to do.

Year-End Financial Statements

The year-end financial statements are the most critical reports we issue. These reports (profit and loss statement and the balance sheet) will be used for tax preparation, for 2010 budgeting and for decision making more than any other monthly reports we prepare. Because it’s important that these year-end financial statements reflect accurate information, we need to make sure they are correct.

You probably have a year-end routine you rely on, but here is a simple checklist of items that you might consider for clients when ensuring the accuracy of their year-end financials:

 Year-End Accounting Checklist

  • Does the general ledger bank balance reconcile to the bank statement?
  • Are there any worthless accounts receivables that should be written off?
  • Does the Allowance for Bad Debts have a reasonable estimate of potential write-offs?
  • Is Deposits is Transit cleared out?
  • Have all the credit card accounts been reconciled as of year-end?
  • Does the company’s inventory balance reflect actual inventory available?
  • Do you need to adjust inventory for items that cost more than their worth and should be written down to their market value?
  • Does the company still have all the fixed assets?
  • Have you recorded depreciation correctly?
  • Does the suspense account have a zero balance?
  • Any prepaid items that need to be expensed (i.e. prepaid insurance)?
  • Have all year end payables been accurately recorded?
  • Does your payroll tax liability coincide with year-end reports?
  • Does the notes payable account (loans) agree with the bank?
  • Does the interest expense for these notes agree to form 1098 from the financial institution? (you no longer need to wait for the 1098’s with the convenience of on-line banking)
  • Are there other debts that have not been included on the books?
  • Are there debts on the books that no longer exist because of forgiveness or nonpayment?
  • Are the 1099 vendor’s correct information, federal identification number, and mailing address?
  • Have I ordered or do I need to order year-end tax forms (i.e. 1099’s, w-2’s, etc).

 

Meet with your Client

Once you have completed this list, make sure you sit down with your client and review the financial statements to identify anything you might not be aware of.

Throughout the review ask the question, “Do these balances seem reasonable?” At the end of the meeting ask, “Are there any other assets or liabilities that I haven’t included?” Occasionally, they might surprise you with an event that you didn’t have any knowledge of before, but that will affect your books.

Finally, the last step of the year-end process is to compare your financial statements to prior years to see if any increase or decrease is reasonable. If you run across some significant changes, you may want to look at the general ledger account to ensure the entries are legitimate or if they need to be reclassified.

As you follow this year-end process you will be amazed at how much you learn. You may see trends and practices that will help you in consulting with the client and help him/her run their business more effectively.

In fact, often times the accountant will know more about the business finances than the owner. So, this year, take the time and make the effort to be precise so that you can go into 2010 with reliable balances and peace of mind.

  • Do you have questions? For no charge, call Andy at Accounting-alacarte at 805 636-1250 and she will be more than happy to support you during the year end process.

     

    Best Wishes for a Prosperous 2010!

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