Bookkeeping Year End Review Tips
3 Items to Review in Your Quickbooks Before Filing Taxes
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If you are doing your own bookkeeping in Quickbooks Online, it is important to ensure you are regularly reconciling & reviewing your reports to ensure that everything appears accurate. This allows you to feel 100% confident when it comes time to use those numbers to prepare your annual income tax return.
Today, I’ve put together some of my favorite bookkeeping year end review tips for you to follow before you hand off those bookkeeping reports to your tax preparer. Think of it like an annual bookkeeping check-up appointment! It shouldn’t take more than 15 minutes, but it could save you from making costly mistakes by reporting errors on your income tax return!
These are items I like to review as part of my application process, so if you want this done for you, then schedule a call with me today!
Review Your Balance Sheet
A quick look at your balance sheet can help you determine if there are errors right off the bat. Are your bank account and credit card balances accurate? If the balances are off, it’s a sign that transactions are either missing or duplicated. We’ll cover this a little more in the next point.
As a general rule, there shouldn’t be any negative amounts under your asset or liability sections, and there shouldn’t be any accounts listed there are that are personal accounts or accounts that are no longer being used.
Ensure all the liabilities that are listed reflect accurate balances that your business actually owes.
Review Your Reconciliation Screen
Part of your regular monthly bookkeeping process should include reconciling your bank, credit card, and payment processor accounts. I have taken a look at several existing Quickbooks accounts where the owner has been completing the reconciliation process, however they have been ignoring old transactions that are still appearing in the reconciliation screen. By having these uncleared transactions still showing up tells me that these were duplicate transactions that are potentially overstating their expenses.
When reconciling your accounts, you need you ensure that anything that is still “outstanding” is still actually outstanding. Really, the only items that may be outstanding at the end of a statement period is a check that you’ve written that hasn’t been deposited yet. Another exception can be a credit card payment that was maybe pulled from your bank account on the 31st, but didn’t actually get applied to your credit card balance until the 1st. Simple timing differences like this are common, and are not really something that need to be looked into further.
Review Your Income Statement
The third item you should review for accuracy is your Income Statement. More specifically, make sure that all the items on there BELONG on there. Here are a few items that I often see on an income statement that should really belong on the balance sheet instead:
Sales Tax Collected being included in the Income section
Sales Tax Paid being listed as an Expense
Owner’s Salary being listed as an expense for an LLC or Sole Proprietor (who hasn’t elected to be taxed as an S Corp).
Another relatively quick check is to compare your Income section (Gross sales, discounts, refunds, shipping income) to your point of sale system – do these numbers match? They should!
Yes, there are timing differences. You don’t receive payment the same day that those sales process.
But at the end of the year when you receive a 1099-K from your payment processor, it’s going to list your GROSS SALES, and you need to be reporting those numbers on your taxes. Make sure your bookkeeping records match.
By taking a quick 15 minute review of these 3 items, you’ll be able to see if your bookkeeping is tax-ready, or if it needs a little more attention before you file away.
If you want help ensuring your books are accurate all year round, then reach out and see how I may be able to help!
Here’s to finding your own version of freedom,
Hi, I'm Megan!
Bookkeeping for the retail industry has some unique complexities that take extra time to manage to ensure accuracy. At Finding Freedom Financial Services, I provide done-for-you bookkeeping services for boutique owners that accurately track these complexities for you so you can have more time and focused energy to dedicate to running your stores. If you’re ready to get your time back, apply to work with me today!