January 2022 – Bookkeeping Best Practices

BOOKKEEPING BEST PRACTICES FOR YEAR-END CLOSE

As the year of 2021 has come to a close, good practices are important as you complete your bookkeeping file for the year. To help ensure your year-end is as seamless as possible, we compiled a few guidelines on bookkeeping best practices for year-end.

Please share this information with your bookkeeper!

Steps to Take: Finalizing 2020

1. Post the 2020 tax preparation adjusting journal entries we provided you, making sure to post them as of 12/31/2020. Once the entries are posted, please pull a Balance Sheet report for the year of 2020 and reconcile all accounts (including net income) against the tax preparation trial balance we provided. Please note: if you have a bookkeeper, please provide these entries to them for them to post and reconcile.
2. Once you are satisfied that your bookkeeping file is finalized for 2020, please lock it and do not make any further changes to the year of 2020.

Steps to Take: Finalizing 2021

After entering and posting all transactions for the year of 2021:

1. Reconcile your cash accounts for each month until you are through the end of the year. Examine the December reconciliation report for any transactions that are older than one year (stale). Please contact us with any questions on stale transactions you identify.
2. Review the suspense accounts (such as Ask My Accountant and any uncategorized accounts) and reclassify any balances there to the correct accounts; suspense accounts should have $0 balances at year-end. If you do have questions on the transactions and need to leave them in the suspense accounts, please be sure to leave a memo describing the transaction and what it was for so we can assist in reclassifying it.
3. Reconcile payroll/salaries/wages expense at year-end against the year-end wage report from your third-party payroll company. The total amount in the payroll/salaries/wages paid account should match the year-end wage report from your third-party payroll supplier. Please contact us with any questions on this.
4. Reconcile all credit card balances against the year-end statements that include all transactions through December 31, 2021. This aids in ensuring all December transactions are accounted for.
5. Reconcile all loan balances against the year-end statements from your lenders. The loan balances on the year-end statements should agree to the loan balances on your balance sheet.
6. Run a General Ledger report for the full year and examine all transactions for any amounts that may have been misclassified. Make any resulting corrections/reclassifications, if needed.
7. Summarize any expenses you paid out-of-pocket (personally) and please provide them to us. We will then be able to adjust these expense items into your business and show your contributions for picking up these expenses.
8. Reflect on your asset purchases for the year. Did you purchase any single items costing over $2,500? Please be sure to provide us with the purchase documents, and also review the bookkeeping to ensure these have been classified as fixed assets on the balance sheet.
9. Examine your Accounts Receivable balance – run an Accounts Receivable Aging report so you can see what each of your customers owe you. Are there any Accounts Receivable amounts that you do not expect to receive? Please let us know of these amounts so we are able to assist you in writing them off. Additionally, if there are negative balances, do you know why? Please feel free to contact us with any questions regarding negative balances you identify.
10. Examine your Accounts Payable balance by running an Accounts Payable Aging report. Please review and ensure that the outstanding items still need to be paid (payable in 2022). Additionally, if there are negative balances, do you know why? Please feel free to contact us with any questions regarding negative balances you identify.
11. Examine your meals expense – meals from a restaurant are 100% deductible for 2021, but other meals are limited to 50%. Please be sure to keep separate accounts for these – meals from a restaurant in one account, and other meals in another account. Please note: entertainment is still completely non-deductible and a separate account for entertainment expense is helpful in properly classifying these costs on your tax return.
12. Once you are satisfied that your bookkeeping file is finalized for 2021, please lock the file and provide us with a backup copy (QB Desktop) of the file, or notify us that the books are finalized if you are on QuickBooks Online. Please do not make any changes to the bookkeeping file after you provide us with the finalized copy – we will assist with any adjustments from there, and provide you with the entries.

Please feel free to contact us with any questions!

Employee Spotlight: Hannah Zucker

Hannah joined the Soukup, Bush & Associates team in August 2013 and works primarily on financial statement attestation services. She graduated from Colorado State University in December 2010 with a Bachelor of Science degree in Business Administration, with a concentration in accounting. She also received her Master of Accountancy degree from CSU in 2012 and became a licensed Certified Public Accountant in 2013. Prior to joining the firm, Hannah worked as an Audit Assistant at Deloitte & Touche LLP, a multinational firm in Denver, Colorado.

In her spare time, Hannah enjoys spending time with her husband and their daughter and son, cooking, going to movies, and being outdoors.