Conducting Special Year-End Bookkeeping Tasks

By Lita Epstein from Bookkeeping For Dummies

Before you close your business’s books at year-end, you’ll need to carry out special bookkeeping tasks such as checking customer accounts, assessing vendor accounts, and deleting any unnecessary accounts. Print a summary of your accounts from your computerized accounting system. If you make an error while closing the books, you can use this printout to backtrack and fix any problems.

QuickBooks provides a Year-End Guide Checklist (see the following figure) to help you keep track of all the year-end activities you need to do. The checklist also includes links to help screens that explain how to do all the year-end closing tasks. You can check off each task as you complete it and save the checkmarks to keep track of your progress during the closing process.

QuickBooks’s Year-End Guide Checklist walks you through year-end tasks with convenient check boxes and links to help screens.

After you complete all your year-end tasks, you can condense and back up all your accounting data for the year being closed. Most computerized accounting systems have a process for condensing and archiving data. For example, QuickBooks’s Archive & Condense Data wizard guides you through the process (see the next figure).

QuickBooks’s Archive & Condense Data wizard makes condensing and backing up your data at year-end easy.

Checking customer accounts

As you prepare your books for the end of an accounting cycle, review your customer accounts. Unless it’s the end of the year, you don’t close the Accounts Receivable account, and when you start a new accounting cycle, you certainly want to carry over any balance still due from customers.

Before closing your books at the end of the accounting cycle, it’s a good idea to review customer accounts for possible bad debt expenses. Now’s the time to be more critical of past due accounts. You can use any bad debt to reduce your tax bite, so if you believe that a customer isn’t likely to make good on a past due account, write off the loss.

Assessing vendor accounts

The end of an accounting period is the perfect time to review your vendor accounts to be sure they’re all paid in full and ready for the new cycle. Also, make sure that you’ve entered into your vendor accounts any bills that reflect business activity in the period being closed; otherwise, expenses from the period may not show up in the appropriate year-end financial statements.

Review any outstanding purchase orders to be sure that your vendor accounts aren’t missing orders that have been completed but not yet billed by the vendor. For example, if you received inventory on December 23 but the vendor won’t bill for that inventory until January, you should record the bill in December to reflect the receipt of that inventory during that tax year.

Deleting accounts

The closing process is a good time to assess all your open accounts and verify that you still need them. If an account has no transactions in it, you’re free to delete it at any time. However, you should wait until the end of the year to delete any accounts that you don’t think you’ll need in the next year. If you’re assessing accounts at the end of an accounting period that isn’t also the end of the year, make a list of the accounts to be deleted and wait for the year-end.

If you use a computerized accounting system, be aware that deleting an account deletes all past transactions in that account as well. So if you want to delete an account at the end of the year, you should mark the account as inactive instead so that new transactions can’t be entered into the account inadvertently.