Preparing Your Books for Year-End

December 2018 | Article

It’s that time of year again. Planning commences as the year draws to a close. But how do you get your accounting records ready? We’ve created this checklist to help you prepare and get yourself ready for year-end planning.

Balance Sheet Checklist

  • Make sure your assets match your liability and equity on your balance sheet.
  • Perform bank reconciliation for all cash and credit card accounts through December year-end. Are there any checks or deposits that have not cleared? Are they duplicates? Do you need to resend a check? Do we need to discuss unclaimed property? Where did the money for the uncleared deposit go?
  • Make sure any checks for December that have not cleared are entered if you are on a cash basis.
  • Make sure all invoices and accounts payable are entered if you are on an accrual basis. This ensures you’ve captured everything related to the current year.
  • Send over copies of all fixed asset purchases and loan documents if any were financed.
  • Look at your accounts receivable aging. Will everything be collected or is there some clean up that needs to be done? Do you have any bad debt that needs to be written off or sent to a collection agency?
  • Adjust inventory, prepaids, etc. as needed.
  • Look at your accounts payable aging. Is there anything on here that you will not be paying or that was entered twice?
  • Provide copies of your W2s and W3s to your accountant.
  • Look at your liabilities. Do your loans balance? Remember to include loan histories for your accountant if you don’t break out principal and interest every month.
  • Make sure the December sales tax and payroll liability balance match your January payment.

Profit and Loss Checklist

  • Do a quick check through your revenue. Are there any expenses entered to a revenue account that should go to cost of goods sold or an expense account?
  • Provide your accountant with any 1099s your company has received.
  • Remember that any expenses over $2,500 should be a fixed asset. The safe harbor threshold for capitalization is $2,500. For instance, if you bought three computers that totaled $2,600, they would remain an expense as one item if not over $2,500. If you have an audit, this threshold may be different depending on your capitalization policy.
  • Look through your miscellaneous or uncategorized accounts. Code to a proper expense account unless very minimal.
  • Separate officer health from employee health insurance.
  • Review your contribution accounts. Reclass any promotion/sponsorship items to advertising. Remember, only donations to qualified organizations are deductible. Your accountant will need a copy of your receipts. Also, political contributions are not deductible.
  • Look through your travel expenses. Make sure all meals are captured in a separate account.

A Few Other Things to Consider
The 2017 Tax Cuts and Jobs Act eliminated the deduction for any expenses related to activities generally considered entertainment, amusement or recreation.

Taxpayers may continue to deduct 50 percent of the cost of business meals if the taxpayer (or an employee of the taxpayer) is present and the food or beverages are not considered lavish or extravagant. The meals may be provided to a current or potential business customer, client, consultant or similar business contact.

Food and beverages that are provided during entertainment events will not be considered entertainment if purchased separately from the event.

Under the new tax reform law, there is (in general) no longer a deduction for entertainment expenses. Entertainment means any activity which is of a type generally considered to constitute entertainment, amusement, or recreation, such as entertaining at night clubs, cocktail lounges, theaters, country clubs, golf and athletic clubs, sporting events, and on hunting, fishing, vacation, and similar trips, including such activity relating solely to the taxpayer or the taxpayer’s family.

Want to know more about meals and entertainment expenses? Check out our guide!

Be sure to separate meals expense from entertainment expenses in your general ledger accounts, as entertainment expenses will not be deductible.

These are just a few of the items to consider as you prepare for year-end. Make sure you take the time to gather the correct information and talk with your business advisor and/or accountant. That way you can close out year-end and start 2019 right.

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