Year-end closing

What is year-end closing?

Year-end closing is the process of finalizing your financial records for the fiscal year. It includes completing all reconciliations, making adjusting entries, reviewing account balances, and closing the books so the new year begins with accurate starting balances. For many businesses, this also involves preparing information for tax returns and external financial statements.

Year-end closing checklist

Reconcile all bank and credit card accounts through year end. Post depreciation and amortization entries. Review accounts receivable and write off uncollectible amounts. Verify accounts payable for any unrecorded bills. Reconcile payroll accounts and confirm W-2 data. Review prepaid expenses and deferred revenue. Confirm inventory counts if applicable. Adjust any accruals for expenses incurred but not yet billed.

The actual close

Once all adjustments are complete, run final financial statements and review for reasonableness. Close the accounting period in your software to prevent changes to prior year transactions. Transfer net income or loss to retained earnings. Print and archive final reports. Document any unusual items or significant judgments made. Your accountant uses these closed books as the starting point for tax preparation.