2020 has finally ended!
We made it. We can breathe a sigh of relief. We all hopefully anticipate a healthier 2021!
However, if you are a small business owner, 2020 cannot be fully be forgotten until all business and individual tax returns have been filed, and if applicable, the audit or review engagement is complete. This first involves the closure of your year-end accounting records.
Below is a checklist of items to assist you as you finalize your December financials:
Balance Sheet:
- Perform all bank reconciliations.
- Agree any investment balances and activity to the year-end statement.
- Run an Accounts Receivable Aging report. Any items over 90 days that you do not anticipate collecting? Record a journal entry to write off bad debts.
- Run an Accounts Payable Aging report. Are there any items over 90 days that you have not paid or were recorded here incorrectly?
- Agree any loan balances to the year-end statement.
- Review retained earnings. Were any items posted here in error? This should agree to the prior year ending retained earnings plus prior year net income or loss.
Income Statement:
- Have you received forgiveness for your PPP Loan? If so, reclassify the loan proceeds from a loan payable to a separate revenue account on the income statement.
- Agree salaries and wages expense to the 940.
- Review the “repairs and maintenance” expense account. Any items that should be capitalized to agree with your Company’s capitalization policy? If so, record a journal entry to reclassify to the balance sheet.
- Review any activity posted to “miscellaneous expense” or “reconciliation discrepancies” accounts. Are there any large transactions posted here, especially credit card expenses, that need to be reclassified elsewhere?
Finalizing:
- Run the Balance Sheet and Profit and Loss statements.
- Are there any negative balances?
- Did you use consistent accounts from the prior year?
Completing these above tasks will provide a quicker turn around for your tax return, less journal entries for your audit, and earn you a gold star from your CPA for your impressive bookkeeping skills!
At Donovan CPAs, we are willing to assist you with any questions or bookkeeping assistance as you wrap up your 2020 financials. Contact our Advisory Services department for more information.
Wishing everyone a healthy, safe Happy New Year!
