Lucas sighed in exasperation as he told me about the year-end accounting tasks he’d dreaded completing. “Every year, it’s the same frantic scramble as year-end approaches,” he said. “I don’t know how to avoid this year-end accounting crunch.”
Like many, Lucas struggles with the year-end accounting tasks. Year-end accounting can be a challenging time. It’s a time when you must ensure that your financial records are up-to-date, accurate, and comply with all tax laws and regulations.
A year-end accounting checklist can be a great tool for a friend in need! It can help you break down your accounting tasks into manageable steps. This blog post provides a year-end accounting checklist to ensure you have a smooth financial transition into 2025.
Table of Contents
What is Year-End Accounting and Why Does it Matter?
Year-end accounting means reviewing and reconciling financial records, preparing financial statements, and ensuring compliance with tax regulations.
Year-end accounting is compulsory for limited companies. All the related parties, like shareholders, creditors, and the government, are interested in the limited companies’ accounts. You can equate the year-end accounting results with being equal to the results of a final-level school exam!
Year-end accounting for unlimited companies is not compulsory. However, it is important. It helps companies to assess their financial performance over the year, identify areas of improvement, and make informed decisions for the coming year.
For a smooth year-end accounting process, companies must maintain accurate and up-to-date financial records throughout the year.
Year-End Accounting Checklist
Following is a year-end accounting checklist that can help businesses stay organized and ensure that all necessary tasks are completed on time. Thus avoiding potential headaches for the company later on.
Updating Bookkeeping Records
There will be some key tasks that have to be included in your checklist regarding updating bookkeeping records, such as:
-Review and reconcile payroll records.
-Prepare tax documents.
–Conduct a physical inventory count. Inventory count ensures that the inventory records match the actual inventory on hand. This will help you identify any discrepancies and adjust the inventory records accordingly.
-Reviewing back documents such as bank statements, invoices, receipts, etc., to ensure everything is recorded accurately and up to date.
-Review accounts payable and receivable to ensure that all outstanding balances are accurate and up-to-date.
-Record any necessary journal entries to adjust accounts and ensure financial statement accuracy.
2. Reconciling Bank and Credit Card Statements
The company records the incoming and outgoing cash in its accounting records. Bank reconciliation matches the cash accounts from the company’s accounting records to the information on the bank statements.
This process ensures the two documents have the same information, resulting in the same cash balances. Bank reconciliation provides many benefits to small companies. It reduces bounced checks to suppliers and gives greater confidence to owners in the amount of cash they have on hand.
Reconciling your statements also makes it easier to find whether there are any errors in the bank accounts. Take immediate action if you find any conflicting items on the bank statements.
The procedures for bank reconciliation depend on the size of the business and the complexity of the financial transactions. Small businesses usually have a simple banking relationship and may only require bank reconciliation once a month.
However, larger businesses with multiple bank accounts and complex transactions may have to carry out more frequent bank reconciliations.
3. Reviewing Financial Statements
The company’s accountant or owner reviews the financial statements and prepares the financial reports based on year-end accounting. This step ensures that the actual financial status of the firm is reviewed.
Financial reports that are based on the year-end accounts reveal the actual business’s growth and performance. That is why reviewing financial statements can tell a lot about the company. It is about reading what the numbers are implying.
A business owner or an accountant will identify good and weak areas from the financial statements and try to identify any trends or anomalies. Comparing previous years’ statements with the present helps in identifying changes in the company’s performance.
Financial statements may also include notes the owner/manager will review, such as management’s discussion, analysis, etc.
4. Tax Planning
Tax season doesn’t start until the upcoming year. However, the end of the year is a good time to start preparing for your upcoming income tax return.
Here’s how you can do tax planning:
- Submit tax forms to employees.
- File end-of-year tax forms.
- Plan on pushing expenses. Many business owners push expenses at the year-end. This step reduces the company’s taxable income for the current year. Pushing expenses means delaying expenses from 31st December to 1st January.
- We all love tax deductions. Don’t we? Hence, year-end is a good time to make upgrades or capital improvements. Want to install a new HVAC system? Or renovate your office? Now is a good time.
- Check for other tax-deductible items, such as obsolete inventory or bad debts.
- Review your compliance requirements to ensure that you are up-to-date with all tax laws and regulations
5. Inventory Check
Performing an inventory check of your business towards the year-end is important. This involves physically counting the inventory. Inventory check also helps find the inventory valuation at the year-end.
6. Back Up Information
To safeguard your accounting data for the upcoming year, include the task of creating backups in your year-end closing checklist.
It is crucial to avoid losing vital accounting data spanning both the current and previous years. To guarantee the security of your data, establish a dependable backup system.
You can back up your accounting information on your computer or smartphone. Or you can opt for a hard copy by printing documents like financial statements and storing them securely. It’s essential to have a reliable plan in place. If you utilize online accounting, take comfort in knowing your information is securely stored in the cloud.
Regardless of your chosen method, ensure you have a well-thought-out strategy to preserve those invaluable accounting records for your business.
7. Review Your Plan For Next Year
Once you have completed the year-end accounting tasks, you will have key insights about your business. You can use these to analyze your business’s performance and plan future goals for your company.
How EA Services Can Help With Year-End Accounting
What’s the most annoying part of year-end accounting for you?
For many firms, it’s the sheer volume of work that needs to be done in a short amount of time.
This time of the year also coincides with month-end closing. Thus resulting in stress and burnout among accounting teams. Not to forget that inaccurate financial reporting has consequences…from regulatory fines to reputational damage.
Improving our year-end accounting process means ensuring that the company’s relevant information is accurate, returns are maximized, and that all year-end financial statements are completed on time.
Expertise Accelerated can help you with this.
Our high-quality staff, augmentation, and outsourcing services can help you with a smooth year-end accounting process. Here’s how:
EA experts can help you share the burden of your mundane year-end accounting and bookkeeping tasks.
- Compiling of all financial statements
- Comparing transactions to find discrepancies in your business bank statement and balance sheet.
- Reconciling balance that matches the bank statement. This helps provide an accurate picture of the company’s cash position.
- And more.
EA offers a wide range of skills and access to scalable resources to provide excellence in year-end accounting (among others).
So that your year-end financials are completed on time.
Reducing stress and improving productivity…
And most importantly, ensuring accurate and consistent financial reporting.
Contact us now for a free consultation.
FAQs for Year-End Accounting
Q: What documents have to be ready for the year-end accounting?
A: Here’s a list of documents that you have to get ready before the year-end:
- Cash records
- Bank and credit card statements
- Loan information
- Sales records
- Payroll information
(If you are using financial software to manage your business’s accounts, then all these documents can be easily extracted. They are only a click of a button away.)
Q: What important accounting entries should not be missed at the year-end?
A:-Depreciation
-Inventory valuation
-Closing entries
-Bad debt expense
-Inventory valuation
-Accrued expenses
-Prepaid expenses
-Retained earnings.
-Income tax provision entry
-Profit transfer entry (in proprietor/partner accounts)
Refer here to learn the definitions of the above terms.