Meticulous Records, Professional Accounting Offer Help Ahead of Proposed Tax Law Changes: Preparing for efficient year-end closeout processes.

• Author: Barbour, Tracy
• Position: FINANCIAL SERVICES

It's that time of year again, full of holiday office parties and gift giving--and year-end accounting.

Year-end--the closing adjustment period of a company's accounting year--is important because it generates financial statements that will be used for tax preparation, future reference, and critical decision making. And if businesses take the time and necessary steps to ensure their year-end accounting is properly completed, they can step into 2018 with reliable balances and peace of mind.

Preparing for an Internal Closeout

Year-end procedures for businesses involve two phases. The first phase takes place before year-end and typically includes year-end tax planning and preparation for an orderly closing of the books. "For very active businesses, tax planning is often the primary motivator for getting the accounting in good enough shape to estimate net income for the year and to do it early enough to allow for implementing late-year tax planning strategies," says Gerald Haugeberg, managing partner of Cook & Haugeberg of Fairbanks. "Management is usually very involved in this aspect of the work, so you have the advantage of their direct participation."

The second phase of year-end preparation happens after the year has closed. This next step in the process entails adjusting and reconciling accounting records to give to outside accountants for tax return and/or financial statement preparation. All of the asset and liability accounts should be reviewed and reconciled or adjusted, as needed, to ensure ending balances are shown correctly.

The amount of year-end work actually conducted by the business, as opposed to an outside accountant or tax preparer, varies considerably. In general, a company's internal accounting capability depends on the background and experience of its people, Haugeberg says. For instance, a small operation may only be able to maintain some form of electronic check register. "In cases like that, the outside accountant is expected to provide the year-end accounting necessary to get the records ready for a tax return," Haugeberg says. "In other cases, the company may have a well-staffed, experienced accounting group fully capable of getting the year-end accounting ready for tax return preparation."

When closing out the books internally, the company's in-house accountant should review the preliminary year-end balance sheet closely, Haugeberg says. All accounts with third-party statements, such as bank accounts, loan balances, and credit card balances, should be reconciled with the statements and adjusted as necessary. The review should also look for anything that seems unusual. "Any balance that hasn't...