January 2024 – Bookkeeping Best Practices
Bookkeeping Best Practices for Year-End Close
OVERVIEW
As we approach the end of 2023, it is important to consider some straightforward tips to ensure a smooth year-end bookkeeping process. We have outlined a set of guidelines and best practices to assist you with this.
Please note that we will be continuing to provide you with our tax preparation trial balance and the adjusting journal entries for all business entities.
Please share these adjusting journal entries, trial balance, and the information below with your bookkeeper.
STEPS TO FINALIZE 2022
Adjusting Journal Entries:
– Post the 2022 tax preparation adjusting journal entries we provided, dated as of 12/31/2022.
– After posting, generate a Balance Sheet for 2022 and reconcile all accounts against the provided tax preparation trial balance. (If you did not receive a copy of the trial balance, please reach out to us and we will be happy to provide this to you.)
Note: If you have a bookkeeper, provide them with the adjusting journal entries for posting and reconciliation.
File Lockdown:
– Once satisfied with the finalized 2022 file and reconciled balances, lock the file for 2022 and refrain from making further changes.
STEPS TO FINALIZE 2023
After ensuring all transactions for 2023 are posted, complete the following steps:
1. Monthly Reconciliations:
– Reconcile cash and credit card accounts for each month, paying special attention to the completeness for the month of December.
– Identify any transactions that are older than one year old on the December reconciliation. These are known as stale Please contact us with any questions regarding stale transactions you identify.
2. Suspense Account Review:
– Review suspense accounts, such as Ask my Accountant or Uncategorized, and reclassify balances to the correct accounts. Ensure suspense accounts have $0 balances at year-end.
– If you do have questions or need to leave items in the suspense accounts, please be sure to leave a memo describing the transaction and circumstances so we can assist in reclassifying it to the proper section of the financials.
3. Payroll Reconciliation:
– Reconcile payroll expenses against the year-end report from your third-party payroll provider. The total amount in the payroll/salaries/wages paid account should match the year-end wage report from your third-party payroll supplier.
4. Credit Card and Loan Reconciliations:
– Reconcile credit card and loan balances against their respective year-end statements. This aids in ensuring all December 2023 transactions are accounted for.
5. General Ledger Check:
– Run a General Ledger report for the full year and examine transactions for any amounts that may have been misclassified.
– Make any resulting corrections or reclassifications as needed.
6. Out-of-Pocket Expenses:
– Summarize any out-of-pocket expenses and provide them to us. We can then make any adjustments necessary to account for these business expenses paid for by you personally.
7. Asset Purchases:
– Reflect on your purchases for the year. Did you purchase any single items costing over $2,500? Capitalization (i.e. fixed asset classification on the balance sheet) is often applied to items that cost over $2,500. When an item is capitalized, it is subject to depreciation over its useful life rather than expensed immediately.
– Please provide details and submit purchase documents for items costing over $2,500.
Examples include equipment (e.g., machinery, tools), furniture and fixtures, vehicles (e.g., trucks, vans), computer hardware, software, building improvements, leasehold improvements, intangible assets (e.g., patents, copyrights), landscaping and outdoor structures, construction projects.
8. Accounts Receivable Review:
– Run an Accounts Receivable Aging report to assess customer debts. Identify and communicate any amounts you do not expect to receive.
9. Accounts Payable Examination:
– Run an Accounts Payable Aging report. Review outstanding items and confirm payable amounts for 2023.
10. Meals Expense Clarification:
– Maintain separate accounts for the following meal expense classifications:
– Meals expenses (subject to 50% deductibility). Note – this changed from 2022; meals provided by restaurants are no longer 100% deductible.
– Entertainment expenses (non-deductible or subject to specific rules)
11. File Lockdown for 2023:
– Once you are satisfied that your bookkeeping file is ready to be finalized for 2023, please lock the file for 2023 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.
– 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 any necessary journal entries.
12. Communication is Key:
– Feel free to reach out with any questions throughout the process!
Remember, the goal of this is to make your year-end bookkeeping a breeze. If you have any questions or need assistance, we are here to help!