Closing Out 2019

As 2019 comes to an end, accountants across the United States will work diligently to close out their clients’ books, so that tax returns can be filed on time. As work stacks up, it is easy to miss a step in the closing process, which could cost time and money. If you are a new firm owner, it is challenging to know exactly what to do, and you may even feel a bit lost. Below you will find an exhaustive checklist to adapt to your end of year closing process.

As a small business owner, this list below will give you a little glimpse into what we review in your file. No stone is left unturned as we close out the end of year; insuring that 2020 will be a great year for you and your business.

Source Documents

What documents you need to save:

  • Bank Statements
  • Credit Card Statements
  • Merchant Statements
  • Loan/LOC Statements
  • Payroll Reports
  • Inventory Count
  • Prior Year Tax Return

Income Statement

The Income Statement (or Profit and Loss) shows the money moving in and out of the business. A review of the income statement accounts will assist you in making certain that the revenue and expenses are accurate so that you can report income properly to the IRS and plan for the future.

If you are looking for trends in the business, you need a true representation of the company’s performance in the books.

Ask yourself:

  • Are transactions left in suspense or “ask my accountant”?
  • Comparing this and the prior year-end, are expenses consistent?
  • Comparing this and the prior year-end, is income consistent?
  • Does the income match the point-of-sale reports?
  • Are merchant fees accurate?
  • Have all direct costs been properly broken out?
  • Are income and expenses booked in correct period?
  • Have all large purchases been capitalized and depreciated?
  • Do payroll totals (salaries and employer tax) match?
  • If an S Corp: Is officer compensation delineated?
    • Are officer health benefits on the W2?

Balance Sheet

The Balance Sheet shows the financial position at a point in time. You can identify what the value of all assets, liabilities, and equity are by pulling this report. It is essential to not only validate the ending balances against their statements, but to validate balances in accounts that do not have statements.

For example, typically you do not have statements for Accounts Payable and Accounts Receivable. In fact, your accounting file is the source of truth. What happens if you look at your books and see a large balance in Accounts Receivable, but know that those clients won’t be paying due to a dispute? Unless you write those balances off, your books will carry those invoices forward. Be sure to write off any aging past due receivable balances, so that your books accurately reflect what you believe you will able to collect.

Validate balances:

  • Checking and Savings
  • Credit Cards
  • Merchant Services
  • Loans and Lines of Credit
  • Payroll Liabilities
  • Sales Tax Liabilities
  • Prepaid Expenses
  • Year-end Inventory
  • Deferred and Unearned Revenue
  • Accounts Receivable and Accounts Payable: Write off Aging Balances?

End-of-Year Adjustments

Prior to sending the file to your CPA, you should do a careful closing of your general ledger to make sure that the books are in perfect shape.

Also, after you send your final year-end balances to your tax preparer, you should lock the books so that no more change will happen. This means that as of 12/31/19, no other entries can be made by anyone. This helps to preserve the integrity of the file so that you can trust the books and taxes are in alignment. Once you have the tax return completed and have the tax preparer’s final adjusting entries you need to enter those entries in your general ledger.

  • Does prior year tax return match the books? If not, make an adjusting journal entry.
  • Enter 2019 Adjustments
  • Close the Books at 12/31/2019

End-of-Year Forms

Filing W2s and 1099s is your main accounting task in January. Before the forms are due at the end of January, make certain that you have all Social Security Numbers and Employer Identification Numbers updated and have correct addresses for everyone.

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