Going into the 4th quarter, it's time to look at closing the books at year-end.

When it’s time to prepare taxes for your client, year-end adjustments are a key part of the process. Think of things like depreciation, owner’s draw adjustments, prepaid expenses, and similar items. These adjustments come in the form of journal entries that tidy up the books before the fiscal year comes to a close.

Closing year-end journal entries are simply accounting entries made at the end of a company's fiscal year to close any temporary accounts and transfer their balances to the regular accounts on the balance sheet. The purpose of these entries is to tie the books to the tax return.  Any company with a depreciable asset will have year end adjusting entries. 

It's crucial to request these adjustments from the CPA. This not only keeps you informed about the changes in the file but also ensures transparency in the process.  

1. Expense Accounts:  In QBO, you have the accounts that were created by the client and the tax filing accounts where they map to. For example, Advertising goes to Advertising on the Schedule C  but so does the account called marketing, or sales meetings.  You will want to make sure that you have all of the COA  expenses tax mapped correctly.  

2. Retained Earnings: The final step in the year-end process is to update the Retained Earnings (RE) account. This account reflects the company’s accumulated profits or losses since inception, plus any dividends paid. Here’s the best part: Intuit automatically books Retained Earnings at midnight on the last day of the fiscal year. So you don’t need to do anything but ensure nothing else got booked to Retained Earnings beside the one entry QBO made. 

3. Depreciation of an asset – the CPA will give you what the amount is for this fiscal year.  There may be more than one asset. This decreases the book value of the asset an increases an expense.

Tying it all together - By performing closing year-end journal entries, accountants ensure that the financial statements accurately represent the company's performance for the year, and provide a clean start for recording transactions in the new fiscal year.  After the closing entries are made, you should run a Trial Balance and keep a copy, and forward to the CPA. I keep it in the Accounts Portal under shared documents.  This makes it easy to find next year. 

Then CLOSE THE BOOKS!  Don't forget this important part! (Put a password on there if you have a client that has a tendency to delete things.) 

Need some extra support going into year-end? Schedule a coaching call with me and we can go through it together! https://coachingbookkeepers.com/coaching