year end

Your Stress-Free Guide to Year End Bookkeeping

“Year end” – what a vague phrase! To non-accountants, it doesn’t mean much beyond planning your new year’s eve party, but for us, it’s a critical concept and activity.

Year end is the time of year where you “wrap up” your financial year, including inventory, revenue, taxes – the whole financial works! Once your year end documentation is complete, accountants will then take these numbers to conduct an audit, review, or simply file your tax return.

How To Ensure Your Year End is Done Correctly

At Legacy Advantage, we have our own way of ensuring an accurate and complete year end. I’m going to share some proprietary information with you, so shhh… keep it a secret. I hope the following checklist takes a bit of stress off your plate and makes your year end process a little easier.

Tax Agency Compliance Review

Every company needs to comply with federal and provincial regulatory bodies. The Canada Revenue Agency (CRA) is a federal tax agency to whom you pay your corporate taxes and your government sales tax (GST) / harmonized sales tax (HST). The Ministry of BC is the BC Provincial tax agency to whom you pay your provincial sales tax (PST).

What to do:

  • Check with the CRA and Ministry of BC to ensure that all GST, PST, payroll remittances have been filed and paid.
  • If you have outstanding amounts, pay them immediately.

Bank Reconciliation Review

The purpose of Bank Reconciliation is to verify if all of your bank transactions have been captured. This is the most fundamental step in ensuring your bookkeeping is accurate.

What to do: 

  • Pull up your bank reconciliation for the last month of your fiscal year.
  • Check if you have any uncleared deposits or payments. If so, are they stale? Are there errors?
  • Any uncleared amounts should be addressed individually. Should they be cleared out or should they remain as uncleared?

Balance Sheet Review

Your Balance Sheet shows you at your company’s Assets & Liabilities are at any point in time. It’s important that this picture is correct before you file your taxes.

What to do:

Many balance sheet accounts need to be reviewed for year end. The following are among the most important:

  • Prepaid Expenses – Are these amounts still prepaid? Or should they be recognized?
  • If you have a sales clearing account (because you have a point of sales system), does it actually clear?
  • Accounts Payable (AP) – Are all AP amounts real? Have these bills already been paid but just not marked off? Cleaning up AP can be quite cumbersome. Reach out to us if you need help.
  • Accounts Receivable (AR) – Are all AR amounts real? Have they already been collected, but just not marked off? Or are they bad debt? Below is a video on how to write off bad debt in Quickbooks Online (QBO).

Profit and Loss Review

Profit and loss statement shows you how much profit… or loss… you have made in the year.

What to do:

  • Let’s assess whether any expenses should be capitalized. Look through your Office Expense and Repair and Maintenance ledger to see if you made any purchases over $500. If so, check if they should be capitalized instead of expensed. For example, if you bought a new Mac for ~$1200, then it should be recorded to “Computer Equipment,” instead of expensed through Office Expenses.
  • Are there any items that look strange? For example, negative sales or positive expenses.
  • Are there any transactions in “uncategorized transactions” or “suspense” or “Ask My Accountant”? Those need to be allocated and cleared up.
  • Lastly, we do a trend analysis. We pull up the profit & loss by month and look for any anomalies. For example, we can check if rent/utilities/payroll amounts have any significant variances from month to month. If so, it might be an indication of error.

Transaction Review

Your bookkeeping is simply an amalgamation of all the transactions you have recorded in the year. It’s important to selectively review these individual transactions to ensure that they are correct.

What to do:

  • For example, at Legacy Advantage, we take a risk-based approach to in-depth review. More specifically, we take a look at all the large transactions to ensure that they are recorded properly.
  • Another area of high risk is journal entries. We review all large journal entries to ensure accuracy.

Client Specific Review

Each client has their own bookkeeping nuances. For example, they want the numbers to be presented a special way, or they want their payroll cost split over a number of different projects. These special requests need to be reviewed.

What to do:

  • Each client has its own nuances. We perform a review according to these nuances. For example, non-profits have deferred revenues and/or funds.

Account Overview

Here’s where we can get a little creative. After all the accounts are accurate, we can look for ways to add value to our clients.

Here are some examples:

  • Do our clients have a hard time tracking Cost of Goods Sold? Then we can recommend POS systems and make introductions to vendors to improve this process.
  • Do our clients have high transaction costs? If so, we can make introductions to Payment Processors to see if they can get a better deal.
  • Do our clients have sales in more than one provinces? Then we need to assess whether there are any sales tax exposures.

At the end of all of this, we can then send these files to your tax accountant for them to file your taxes.

Need assistance correctly reviewing your year end?

You still have time to contact us before your year end documents are due.

 

About Bob Wang

Bob is the owner and founder of Legacy Advantage. He holds a CPA and has experience at a private client services brand, Big 4. Bob's passionate about empowering organizations through quality bookkeeping services.
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