The end of the year is full of holiday joy and time spent with family and friends; if you have the time to spare! For many businesses it is also that memorable time of year in which the accounting department is striving to get organized, gather last minute W-9's, and get expenses paid.

In order to give your CPA the cleanest books, and save your company money in CPA fees to boot, I've compiled a "to do" list. Follow this list and your CPA and check book will thank you.

Step 1: Reconcile

I find the easiest way to find any glaring errors is to reconcile your bank accounts, petty cash and credit card statements; if you haven't been doing this throughout the year (which I strongly encourage). In this process you may find debits made that were missed due to a lost receipt or you'll find checks that had not cleared the bank.

Step 2: Adjustments

I tend to work on Assets first. Go through each asset account and ensure that it is categorized correctly. Often times an item that should be expensed is incorrectly logged as an asset. This can go the other direction as well, an asset is incorrectly logged as an expense. The general rule as to whether an item is an asset or expense: GAAP defines a company's assets as items it owns or controls that have measurable future economic value. hmm. What does that mean? Ask yourself this question: will that item have sellable value in 5 years? If you answered yes, then categorize this as an asset. See this article on Capitalization vs. Expense for a more in-depth description: GAAP & Capitalization of Assets Rules. Don't forget to record your Depreciation on these assets!

Pre-paid expenses can be tricky, but I find keeping a spreadsheet of every single transaction can help keep things straight.

Next work your way down your liability accounts. Accrue any interest on loans through the end of your fiscal year. This is especially true on loans such as mortgages, if you are simply recording the monthly payment you may have missed separating out the principal from interest.

December is a good time to scrap or donate those assets that you are no longer using. Keep your donation receipt for tax purposes and remember to update your depreciation schedule.

Now is the time to conduct a physical inventory count and record adustments.

Check your Receivables to see if you need to write off any as bad debt.

Take a look at your sales and see if you've missed an invoicing opportunity prior to closing the books. Lastly, check your bills. Many bills show up in January but they are for the billing period of December, you can accrue for these in December.

Step 3: Payroll

Check your documentation for any new hires you had this year. Must haves are: W-9 & I-9. Recommended to have is an employee handbook and form signed by new hire that they have received, have read and will comply with the handbook.

Prepare and remit year end reports:

W-2
W-3
940
941
1099
1096

Step 4: Review

You can do this many different ways, but I find it easiest to run a Profit & Loss and Balance Sheet for the year and look through each account for consistency and accuracy. If you use job classing, make sure it is complete and accurate at this time.

Step 5: Reports

It is a good idea to run final reports after you have completed these steps so you have a record of what you handed off to your CPA. I keep a hard copy and a soft copy.

Profit & Loss, by month
Profit & Loss, by class or job
Sales Reports
Balance Sheets as of each month end
Aged Accounts Receivable
Budget vs. Actual, if applicable
General Ledger
Payroll reports
Trial Balance

Step 6: Back up

Do this now and again after you get your closing entries from your CPA.