As the end of the calendar year approaches, small business owners or their accountants need to begin the process of closing the company’s books. Do you know what you should be doing before and after December 31st to close your books?

Certain steps in the year-end closing of your company’s books need to be performed prior to December 31st; they include:

• Review a copy of your Profit & Loss report after posting your typical month-end adjustments and determine if you currently have a year-to-date profit or loss; if you’d like to reduce your profit for the current year to save on income taxes, purchase fixed assets and place them in service or pay out employee bonuses or special gifts prior to December 31st .
• Determine which fringe benefits paid on behalf of your employees need to be reported on their W2 forms.
• Take a physical inventory count of the assets you track as inventory.
• Create a budget for the next year.

Other year-end closing steps can be performed after January 1st; they include:

• Reconcile all accounts (e.g., bank, credit card and loan accounts) to third-party account statements.
• Prepare inventory adjustments based on the physical inventory count.
• Review accounts receivable accounts and write-off as bad debts those not expected to be collected.
• Prepare a list of prepaid items and adjust expense accounts accordingly.
• Review vendor invoices received after the end of the year and record as accounts payable those that pertain to goods received or serviced performed in the prior year.
• Review account detail of all revenue and expense accounts to verify that transactions were posted to the proper account and on a consistent basis.
• Prepare depreciation expense adjustments based on an updated depreciation schedule of your fixed assets.
• Prepare any adjustments necessary to reconcile payroll liabilities to annual tax forms.
• Prepare and send payroll tax forms by due dates (e.g., W2, W3, 940 and 941 forms).
• Prepare and send form 1099’s to independent contractors by January 31st; send corresponding form 1096 to IRS by February 28th.

The preceding lists are not all-encompassing, but they do provide a basic accounting checklist for most small businesses reporting on the accrual basis.

If you are in need of assistance in closing your books, please contact Flexible Accounting Services of the Triangle today and let our experienced professionals assist you.