If you own a small business, you might find yourself asking the age-old question: How does a bookkeeper close out the books for the CPA? It’s an important question—after all, your accountant can’t prepare your taxes without accurate and up-to-date financial statements. Fortunately, we have an answer. Let’s dive into how a bookkeeper closes out the books for the CPA.
Organizing Financial Records
The most important step in closing out the books is making sure that all financial records are organized and up-to-date. This means that all transactions must be recorded accurately, either in a physical ledger or in accounting software. It’s also important to make sure that all accounts are reconciled and any discrepancies are resolved before sending them off to your accountant. Doing this will help you avoid any potential headaches down the line when it comes time to prepare your taxes. As bookkeepers, we handle this on a regular basis throughout the year. At year-end, we complete extensive reviews to ensure accuracy.
Recording Adjusting Entries
Once bookkeepers have ensured that all of your financial records are in order, it’s time to record any necessary adjusting entries in order to ensure accuracy. This includes recording accruals such as unpaid wages, prepaid expenses, and accrued income. Interest on loans must be recorded and reconciled. Payroll reconciliations involve ensuring that the payroll recorded in the books matches the quarterly and annual reports provided to the state and IRS. Double-checking that the Accounts Receivable and Accounts Payable are accurate is another step to confirming that the books can be closed out accurately. These entries must be made prior to closing out the period so that they can be accurately reflected on the financial statements sent to the accountant.
Closing Out Accounts
The final step is closing out any accounts that need to be closed for tax purposes or other reasons. This involves transferring any balance from one account to another (e.g., from a current asset account such as Cash to an income account such as Revenue). This ensures that all accounts reflect their correct balances as of the end of the fiscal year or period being closed out for review by your accountant or auditor.
Closing out books for a CPA can seem daunting at first glance but it doesn’t have to be! With careful organization and attention to detail, we can close out your books before sending them off for review by their CPAs or auditors. By following these steps—organizing financial records, recording adjusting entries, and closing out accounts—you can rest assured knowing we are well on our way towards preparing accurate financial statements for review by your CPAs.