How to Prepare Your Books for Your Accountant

Every tax season, companies and small business owners must go through the process of preparing their returns. However, many choose to invest in the services of a professional accountant to look at and balance those books for them. It’s a process that saves considerable time for the owners, as well as hassle and worry, as you can trust that your accountant knows the business. You’ll know that everything filed has been looked over to ensure that it is error-free prior to submission. Whether you’ve just started a business, or you’re finally looking to add a dedicated accountant to your roster, we’re here to explain how best to prep your books so that your accountant can get to work straightaway.

Also check out this helpful link for some information on getting started with your record-keeping if you are a new business, and how to avoid common tax mistakes that could get you into some trouble.

Before we begin, a helpful tip: if you don’t already do this, consider gathering together all tax information in a single place as it arrives throughout the fiscal year. Items like a manila folder or accordion folder are useful for this. In this way, you can be sure you’ll have all of the necessary documents when it is time. In addition, look here for some advice on choosing a tax preparation agent if you don’t already have one.

Reconcile All Resources

By reconciliation, we mean making sure everything from your cash deposits, to checking or other bank account transactions, are completed. When going through this step, it’s a good idea to look for any outstanding checks or other items that for whatever reason are incomplete. Is there an old check past the void date that doesn’t show up? Did a bank deposit not post properly? Look for these irregularities and investigate.

Take Care of All Invoices

Check to make sure all invoices have posted properly. In this step it’s especially important if your accounting is done on what we refer to as an “accrual basis.” Your income and expenses are recognized for tax purposes based on when they occur, not when they are received. This makes the posting dates important.

Double-check Credit Card Account Statements

Many people overlook this because they are unclear about how CC statements should look in this case. It’s important to date the expenses on CCs when they are charged, not when they are paid. This can work to your benefit, as business charges made in December can be claimed even if your statement listing the charges comes in the next year.

Get a Report From Lender if You Have Loans

If you have business loans for a given year, formally ask for an end of year report from the lending institution you used, and check it against the numbers on your balance sheet. Most often, if they don’t match, it is because of interest accrued. You can rectify outstanding interest by posting to an expense account, but remember to create an entry for this.

File Any Necessary 1099s

If your business has used any contractors throughout the fiscal year, you’ll need to do this. Hopefully by this time you’ll have already collected all necessary W-9 files and information from any contractors used. In the event that you do need to collect and prepare this information, they must be postmarked no later than Jan. 31st.

Print a YTD Ledger

Look over everything again. Go through all of the various accounts and insure that income and expenses are processed and shown correctly. Make sure all documentation has backup proof along with it.

Check to Make Sure You Have All Files

Now that you’ve prepared your books adequately, make sure you have included the necessary elements so that your account has everything to properly file your return. Most commonly, an accountant will need:
• Loan documentation
• Payroll reports
• Your sales tax liability
• Copies of all W2s and W3s
• Inventory Balance
• Donations received or given
• All 1099s both received and issued
• Fixed Assets such as equipment

Preparing your books can be painstaking, but if taken in steps throughout the year, actually putting together all of the necessary information to hand off is much easier, and will be of great benefit when the time comes.

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