Year-end Guide

The year-end close is a crucial process involving the review and reconciliation of financial statements and records.

it is recommended to do it more frequently throughout the year for enhanced effectiveness.

Year-end close approaches may differ, but these steps ensure completeness.

• Fix anomalies on a weekly basis
• Get ask my accountant cleared
• Reconcile all bank & CC accounts
• Book adjusting journal entries
• Check for accuracy, inconsistency & discrepancy
• Review & reconcile balance sheet accounts
• Scan & analyse profit & loss account

Let’s dive into each…

You are good to go for the next step.

• Books

• Year tax return's

Ensure to match the books numbers and last year tax return's numbers

Adjusting journal entries are made in a company's general ledger at the end of an accounting period to ensure that the financial statements accurately reflect the company's financial position.

This is especially relevant for companies that use accrual accounting.

These entries should be accompanied by relevant workpapers that clearly show the calculations supporting these entries.

The revenues earned but not yet received. For example, a company may perform services for a customer in december but not receive payment until january.

The expenses that have been incurred but not yet paid. For example, a company may pay its employees on a biweekly basis, but the salaries for the last week of december will not be paid until january.

The revenues that have been received but not yet earned. For example, a company may receive a deposit from a customer for services to be performed in the future.

The expenses that have been paid but not yet incurred. For example, a company may pay for a year's worth of insurance in december.

The allocation of the cost of an asset over its useful life.

You are ready for the next step.

• Fixed anomalies through XenettGO
• Got ask my accountant cleared
• Reconciled all bank & CC accounts
• Booked adjusting journal entries

It is time to check for accuracy, inconsistency & discrepancy

Review any new vendor or customer created to ensure they are coded correctly.

Review any GL created to make sure it was required to create new or check if any of existing could have been used without creating new one.

Look for amount consistency on vendor level to check if there are any missing transactions or miscoded to other vendor.

Look for consistency on certain transactions like journal entry or vendor expense/bill coming every year to ensure completeness of the books.

Look for expenses greater than threshold limit (For eg : $2500) in office expenses and capitalise if required.

Look for any duplicate vendor or customer name in books and fix them if there are any.

Similarly, Look for any duplicate vendor or customer name in books and fix them if there are any.

By accomplishing this task, you can ensure the accuracy of your financial statements, identify potential problems, and make better business decisions.

Now you're all set for the next!

• Ensure that there are no transactions recorded in reconciliation discrepancy account.
• Transactions such as transfer, ACH, debit card purchases, deposits (except of last 2-3 days), journal entries, checks (dated less than 180days) should not remain uncleared.

Review that the undeposited payments are the most recent ones and are expected to be deposited in the future.

• Review that this account balance should ideally consist of the last few days’ receipts.
• If the merchant deducts any fees or loan repayments while depositing the money, ensure to record proper adjustment for the same.

• Review the customers showing negative balance and investigate the reasons.
• Review the customers showing zero balance to make sure invoices and payments/credits are properly applied.
• Review the customers showing negligible balances and consider writing them of.
• Review the customers showing overdue invoices for more than 90+days. If they are not recoverable, consider writing them off after getting the necessary approval.
• Review the ‘AR Aging Detail’ report to see any unapplied payments/credits and apply the same with the open invoices.

• Look for accounts like insurance, rent, apps subscriptions that are paid annually in advance, it should be posted as prepaid.
• Ensure to record expense recognition entries and match the ending balance as per prepaid schedule.

• Look for any purchases below the capitalization limit (Say $ 2,000) and expense them out.
• Ensure to record depreciation entries, considering any new assets bought in the same period.
• Review accounts like office expenses, office supplies/equipment, repairs and maintenance etc., and transactions for more than the capitalization limit should be capitalized.
• Ensure to have a proper documentation/bill copy for each newly purchased asset.

Account's balance should remain the same every year except unless any new deposit is added or returned.

• Review the vendors showing negative balance and investigate the reasons.
• Review vendors showing zero balance to make sure bills and payments/credits are properly applied.
• Review the vendors showing negligible balances and consider writing them of.
• Review the vendors showing overdue bills for more than 90+ days. If they are not recoverable, consider writing them off after getting the necessary approval.
• Look for cash vendors like Uber, Amazon, Home Depot etc. They should not be in the aging.

• Ensure to allocate the loan payment between interest and principal.
• Reconcile the loan balance as per books with the statement.

This account should carry the balance that is yet to be paid. Ensure that this account doesn't carry the liability that is already paid. Use payroll reports to ensure liability and its payments are correctly booked.

Review that the balance in this account is a real payable and is getting paid off in the next year.

• Review that all recurring expenses such as rent, subscription payments are accounted for. In case any bill or expense are yet to be recorded, make sure to accrue the same.
• Review that payroll accruals entries have been entered.
• Ensure any accruals recorded are reversed out in the following year.

• Verify that there are no abnormal accounts like ‘Opening Balance Equity’.
• Verify that prior year shareholder distributions or partner draws were cleared to retained earnings in the current fiscal year.
• Review the new transactions recorded to equity to ensure they are correctly recorded.

• Review any bills/expenses recorded in revenue account.
• Look for any account showing a negative amount and take necessary action.
• The expenses like rent, apps subscription, and electricity should be consistent. accrue it if necessary.
• Review accounts like office expenses, repairs, and maintenance, office equipment, etc, and consider reclassifying purchases for more than$ 2.5k.
• Review accounts like insurance, apps subscription, rent, etc to ensure that it doesn't have any expenses for the future. If so, consider reclassifying it to prepaid expense.

• Verify that gross wages match the payroll report.
• Review that payroll taxes should only include the employer portion and not the employee portion. It should match with payroll report.
• All corporations: officer wages should be split out from gross wages in a separate expense account.
• At times, advances are paid through payroll. Make sure they are not recorded as a part of gross wages but as an asset on the balance sheet.
• Employee benefits should be recorded separately and kept separate from gross wages.
• Verify payroll deductions (garnishments, investments, taxes etc) and ensure that they are not recorded on the P&L but should be recorded as a liability on the balance sheet.