Getting Ready to Close the Books
Getting Ready to Close the Books
Getting Ready to Close the Books
Although many bookkeeping tasks are done all year long, there are other functions that are
performed less frequently. While sending invoices, paying bills, recording transactions, filing
receipts, handling payroll and analyzing inventory are carried out on a daily, weekly or monthly
basis, sales and payroll tax reports and estimated tax payments are only prepared and sent at
the end of the quarter. In addition, there are several bookkeeping responsibilities that are
reserved for the end of the year. With the month of November almost half over, now is a good
time to take a closer look at what these annual bookkeeping tasks entail.
Accounts Receivable
As the year comes to a close, bookkeepers must examine and evaluate past due
receivables. Once these accounts are identified, a decision must be made as to which of
several possible actions to take. The choices are to continue to attempt collection from
the responsible party, turn the account over to a collection agency or write the
outstanding balance off as a loss.
Inventory
Inventory review is an important part of closing the books for any business. Since
inventory is an asset, it figures into any calculation of profitability and loss for the year.
In addition, an accurate inventory is an important precursor to tax preparation. This
includes determining the value of inventory items that have not been sold and
identifying those that are unsellable. Such items amount to an inventory mark-down
which can be claimed as a loss on the business tax return. Not claiming such a loss
automatically means that the inventory will be overstated and taxes will be paid in
excess of what would otherwise be owed.
Financial Reports
The end of the year is the time when company bookkeeping data is used to prepare
financial statements that give an accurate picture of the company’s financial condition.
These reports, which include Income Statements, Cash Flow Statements, Statements of
Financial Position and Equity Statements, are important because they give business
owners the information they need to make critical decisions about asset allocation,
taxes and business operations. In addition, they contain pertinent information to be
considered by potential lenders and investors and are a necessary antecedent to the
preparation of business tax returns.
Tax Forms
Although W-2 and 1099’s are not due until after the first of the year, bookkeepers must
make sure records are in order to generate these required tax forms once the New Year
rolls around. The deadline for filing W-2s with the IRS and mailing copies to employees is
January 31st while that for filing 1099s for independent contractors is February 28th.
Although bookkeeping is a key business function all year long, it is especially critical at the close
of the year. Carefully performing the year-end bookkeeping functions described above ensures
accurate financial reporting, maximum tax savings and more effective business planning. Now is
the time to get your business ready for 2016!
If your business is seeking an outsourced bookkeeping solution, the experienced professionals
at Orange County Bookkeeping can provide you with the expertise you are looking for. Our
licensed accountants and bookkeepers are equipped to serve Orange County businesses of any
size, structure or industry focus. Visit us today at www.ocbookkeeping.com to learn more
about our full range of bookkeeping, tax and business consulting services. Contact us by phone
at (949) 242-9852 at or by email at info@ocbookkeeping.com to receive a free, no obligation
consultation.
Irvine, CA 92614
