Your QuickBooks Year End Accounting Check List

R.E.M. once sang, "It's the end of the world as we know it, and I feel fine". OK, so perhaps it's not the end of the world, but the end of the year is coming quickly. Do you feel fine regarding the condition of your QuickBooks accounting financials are? This blog topic, regarding actions you can take proactively, is one I post annually around this time of year. Each year I read what I posted the year before to not only ensure t he information is current and relevant but to also determine if I can improve upon what I have written in prior years. This year is no different. 

There are numerous things you can and should do to ensure your QuickBooks data is accurate and ready for a tax return as well as ensure you are looking at good data for business analysis purposes. Many of these things you can do yourself, while other tasks may require some outside expertise (and by all means, QuickTrainer, Inc. is certainly an excellent source for you to turn to for help). Now is the time to get your QuickBooks financial house in order. I encourage you to not put this off because the 2012 tax deadlines will sneak up on you before you know it. More importantly, if you do not ensure that many of the items below are correct, you cannot properly analyze how your business is performing. Again, NOW is the time to take action.
If you’ve been tracking your financials throughout the year (like all good business owners should do), then the amount of energy which needs to be expended will be minimal for this task. If, however, you have been procrastinating then you will no doubt have some work to do. Let's get started...
What follows are some very specific things you can do now to get ready.
NOTE: As you read through the below list, if you find yourself becoming overwhelmed, it's OK. Simply pick up the phone and call QuickTrainer (910-338-0488) or send us an email at . We are here to help you and we love helping business owners, not to mention, we do this for a living!


  1. Account Reconciliations – Make sure all bank and credit card accounts are reconciled to the penny as of month-end. Business bank statements typically end on the last day of the year, while some will end on a Friday if the last day of the month falls on a Saturday or Sunday. Credit card statements have varying closing dates. If you find, when reconciling, your opening balance does not match the statements opening balance, STOP and give us a call.
  2. Make a Copy – Once January 2012 rolls around, and you do the December 2011 reconciliations, take the time to make a copy of the front page of each bank and credit card statement. Your CPA will want these copies to verify these accounts have been properly reconciled. Also, if you have made any major capital purchases in 2011, say greater than $1K, make a copy of the sales receipt or invoice for your CPA. This does not include purchases of product for resale.
  3. Want to know one of the best things you can do for yourself, your CPA and anyone whom you desire to review your books? Really pay attention to this advice! It will save you thousands of dollars during the duration of your business. Are you ready? ALWAYS, always, AlWaYs… put a brief and succinct memo in EVERY transaction you record. Checks, bills, credit card charges, deposits, etc., should always contain a brief memo which describes “What is this expense?” and “What is the source of this revenue?”. Do NOT cheat in this area. It will help you when you are looking at a transaction months from now. It helps your CPA (or us at QuickTrainer) when you have a memo to understand what is the purpose of the transaction. It tells us if the transaction has been recorded to the proper G/L account. If not, we can correct the transaction quickly. Assuming the transaction is in the correct G/L account, we can move on with confidence. When accountants encounter transactions we don't understand, we have to ask questions. Questions cost you money. ALWAYS MEMO, MEMO, MEMO.
  4. As you review each General Ledger (G/L) account found on your Balance Sheet and Profit & Loss statement, look for accounts which have, “ – Other” in them. This is an indicator that transactions have been recorded to a parent G/L account. The rule for QuickBooks is, whenever you have sub-accounts (a.k.a., child accounts), you never post ANY transaction to the parent account. The parent account serves as a means to SUM the transactions within the sub-accounts.
  5. W-2/W-3 – If you have employees (personnel in which you withhold federal, state, social security and Medicare taxes on; a.k.a., payroll taxes), and you are responsible for providing them with a W-2, make sure you are prepared to do this sooner rather than later. Do you have a current Form W-4, State Form (NC-4 for North Carolina) and Form I-9 on file for each employee? Do you have all employees' social security numbers recorded in their QuickBooks employee profile? Do you have current addresses for each employee? Are you confident your payroll items are setup properly?

    When printing W-2's for your employees and your records, don’t forget to include a W-3. The W-3 is a summary of all W-2’s. It gets filed along with Copy A of your W-2’s and is to be mailed to the Social Security Administration. NOTE: DO NOT FOLD OR TEAR COPY A OF YOUR W-2’S. SAME THING APPLIES TO THE W-3. When you are ready to mail Copy A and the W-3, place them in an 8-1/2 x 11 envelope for mailing.

    There is no need to purchase pre-printed forms for your W-2’s/W-3. It is now acceptable (and has been for about 5 years now) to print these forms on plain paper. Don’t forget to sign, title and date your W-3. You need to mail (or personally hand-out) your W-2’s on or before January 31, 2012. Encourage your employees to compare their final 2011 dated paycheck to their W-2. It is important to correct any errors prior to March 1, 2012. The W-3, along with Copy A of your W-2’s need to be mailed on or before February 28, 2012.

  6. 1099’s/1096 – If you have subcontractors who performed work for you in 2011, then you are obligated to provide each subcontractor a 1099 reflecting the compensation they were paid. However, this need only apply to persons or businesses in which you know they are not incorporated, or whom you have any doubt as to if they are actually incorporated.

    Much like the W-2's and W-3 discussed in #5 above, when printing 1099's for your subcontractors and your records, don’t forget to include a 1096. The 1096 is a summary of all 1099's. It gets filed along with Copy A of your 1099's and is to be mailed to the Social Security Administration. NOTE: DO NOT FOLD OR TEAR COPY A OF YOUR 1099’S. SAME THING APPLIES TO THE 1096. When you are ready to mail Copy A of the 1099's and the 1096, place them in an 8-1/2 x 11 envelope for mailing.

    To help with this decision, and to make sure you have the proper paper work on-hand, you should have (actually, should already have) a signed
    Form W-9 on file for each subcontractor. The Form W-9 is a form whereby the subcontractor provides you with their proper name, address, tax id number and indicates they are exempt from your withholding any federal taxes. If a subcontractor uses their social security number, then you know they are not incorporated. However, you can be a sole proprietor, yet still have an assigned federal tax id. Again, if you are not certain about the legitimacy of any subcontractor being legally incorporated, err on the side of caution and send them a 1099.

    In QuickBooks, your subcontractors must be setup and paid as “Vendors” (NOT Employees). Additionally, you must have each subcontractors address, tax id and the box checked in QuickBooks which reads, “Vendor eligible for a 1099”. Also, you must tell QuickBooks the specific G/L account(s) to look in for 1099 subcontractor vendors. The only accounts which should be considered are those which relate to “Compensation”; not reimbursed expenses.

    Finally, if a subcontractor was paid more $600 or more in compensation, then QuickBooks knows to produce a 1099. If a subcontractor was paid less than $600, QuickBooks will not create a 1099. This is how it should be, as $600 is the threshold.

  7. With regards to #5 and #6 above, be sure to make a copy of your employees W-2’s, your W-3, your subcontractors 1099’s and your 1096. Your CPA will want a copy to verify your numbers and for their files.

    The next several topics deal with a review of your Balance Sheet for the year. You should ensure you are looking at the Balance Sheet on an accrual basis (yes, even if you file your return on a Cash basis).

  8. Accounts Receivable (A/R) – If you create invoices, and any invoices are unpaid, you will see “Accounts Receivable” on your Balance Sheet. Check this balance against the balance on an A/R Aging Report. Do they agree? If not, I will share with you, one of the most common reasons for these reports to not agree has to do with Unapplied Payments (i.e., payments received but not posted to an invoice). Call us for help with this issue.
  9. Undeposited Funds – As of 12/31, there should be no ($0) Undeposited funds on the Balance Sheet. If you do have Undeposited funds showing, it is typically the result of deposits made, but post dated for the next year. If you have checks you have received in late December, but simply have not gone to the bank yet to deposit these funds, and do not plan on going to the bank until early January, you still need to record the deposit as of 12/31. The IRS takes the position of the fact that you had access to these funds in the current year. Just because you did not make it to the bank, does not excuse you for not recognizing the revenue in the year in which the checks were received.
  10. Fixed Assets – If you have made purchases this year, greater than “X” (where “X” is to be determined by your CPA, or otherwise use a guideline of $250) which have a useful life, then these purchases should be found in a Fixed Asset account. This includes, most commonly, purchases such as land, a building, leasehold improvements, furniture, fixtures, equipment, tools, computer hardware, computer software, office equipment and vehicles. You should NOT include product for resale (as this would be found in an Inventory Asset account or a Cost of Goods Sold account) or if you purchased a large amount of a consumable (e.g., Office Depot had a great deal on paper, so you purchased $700 worth. Paper is a consumable).

    Finally, unless you record the depreciation of assets yourself on, say, a monthly or quarterly basis, you should not have anything posted to Fixed Asset accounts utilized to reflect depreciation (e.g., a G/L account which reads something like <Less Accum Depreciation of FA>).

  11. Accounts Payable (A/P) – If you enter bills (and you should) and have bills which are still unpaid, you will see “Accounts Payable” on your Balance Sheet. Check this balance against the balance on an A/P Aging Report. Do they agree? If not, much like the A/R notes mentioned prior, I will share with you one of the most common reasons for these reports to not agree has to do with Bill Payment Checks created to pay a bill but then the amount of payment on the check does not match the original bill (because it was later changed for some unknown reason – don’t do this), or the bill was deleted (again, don’t do this) for some unknown reason. Again, call us for help with this issue.
  12. Credit Cards – We have already discussed the reconciling of credit card accounts in #1 above. While looking at your Balance Sheet you should not have ANY credit card accounts reflecting a credit balance unless you really did overpay a credit card total balance.
  13. Sales Tax – This is one of the areas most often abused by people who don’t know better. The bottom line is this: whenever a taxable item is used on an invoice or sales receipt, sales tax is accrued in the Sales Tax Payment liability account. When it’s time to pay your sales tax you should create a Sales Tax Payment check, NOT a regular check. Therefore, drill down into the Sales Tax Payment account. The only transactions you should find are invoices, sales receipts, credit memos, an occasional sales tax adjustment entry and sales tax payment checks. Call us for help with this if you find other transaction types.
  14. Payroll Taxes – Much like sales tax above, this is another area frequently misunderstood. Paychecks create the payroll tax liability. Liability checks are used to pay these liabilities. Any other transactions amongst your payroll tax liability accounts, with the exception of an infrequent payroll liability adjustment is unacceptable and going to cause you issues with proper balances.

    Personally, I like to separate the various payroll liabilities into their own separate G/L account. This allows me to look at a glance to see if (a) the company social security and employee social security are in balance with each other; (b) are the company Medicare and employee Medicare in balance with each other; and (c) are there any payroll liability accounts showing a credit balance? If so, do I understand why?

    Finally, your CPA will want to have copies of your payroll forms filed throughout the year. These include: 941’s, 940, NC-5, NCU101.

  15. Business Loans – This includes business loans from banks, car loans, mortgage loans, a line of credit, a loan from Uncle Bob or a loan from Shareholder (think S-Corp), Member (LLC) or Owner (Sole Proprietor). Most of these loans provide you with a monthly statement reflecting interest and principal balance. While these type loans can be reconciled monthly, just like a bank or credit card account, it is more typical to conduct an annual reconciliation only utilizing the last statement of the year. Assuming your prior years' opening balance was correct, simply enter your year-ending principle balance, make sure the date reflects the statement date and then continue by clearing all principle payments. Any remaining difference is likely going to be the result of principle and interest payments not being recorded properly. A simple journal entry can be made to correct this difference, whereby (most often) the loan account reflecting the principle balance is credited for the difference and an interest expense account is debited. NOTE: Let me caution you to say the above is a typical or common scenario. There could be other issues causing a discrepancy. Call us for help if you have any doubts about this topic.

    When it comes to loans from a shareholder, member or sole proprietor simply make sure the balance outstanding is correct. I too frequently find these loans have a credit balance. This can be where payments have been made for the repayment of a loan, but the actual original principle balance was never recorded.

    Finally, if you have made a personal loan of your funds to your business (which is very common), ensure you repay yourself for this loan before taking Profit Distributions or Draws. This way, you avoid any federal and state taxes being paid on these distributions or draws.

  16. Equity – Within the equity section of your Balance Sheet you will most commonly find balances for Capital Stock, Additional Paid in Capital, Profit Distributions or Draws and Retained Earnings. These accounts seldom have transactions posted against them, with the exception of distributions or draws. Capital Stock would only see a change if something happened to the business such as a partner coming in or leaving. It would TRULY be an exception to have ANYTHING posted to Retained Earnings.
  17. This concludes the Balance Sheet review. Next, we move on to a review of your Profit & Loss Statement for the year. You should ensure you are looking at the Profit & Loss Statement on an accrual basis (again, even if you file your return on a Cash basis).
  18. Income – Within the income section of your P&L you will typically find Invoices, Sales Receipts, Credit Memos, and an occasional Payment (perhaps reflecting where a discount was given through the Receive Payment functionality). However, I realize some people bypass invoicing and sales receipts, etc. and simply record Deposits. If this is you, then you would certainly have “Deposits” recorded within your income section. Checks would be more of an exception than the rule. The exception most frequently occurs when the business writes a refund check to a customer or client. There are some other unique scenarios whereby checks might appear, but these are considered beyond the scope of this blog.
  19. COGS (Cost of Goods Sold, a.k.a., Cost of Sales) – Within these accounts you will find products you resell, subcontractors who generate revenue for your business, wages of employees who generate revenue and perhaps Merchant Service Fees along with shipping, postage and materials related to shipping and postage. When reviewing the details of these numbers, if you spot transactions that don’t fall within the above, it likely means the transactions have been recorded to the wrong account and should be moved. In other words, you only wish to have those transactions which are directly associated with a direct expense relationship incurred in order to generate revenue for your business.
  20. Expenses – While reviewing the details within your various expense accounts, you are simply making a determination; do each of these transactions reside in the proper G/L account? Remember #3 regarding memos? These memos are going to go along ways towards helping you make this decision. If you see a check in Office Supplies for $777.77 and the memo says “Laura’s new laptop” you know this check has been recorded to the wrong G/L account. It should be recorded to a Fixed Asset account (e.g., 1840 - Computer H/W). If you find a bill to Progress Energy sitting in the G/L account, “6710 – Books & Publications”, you know this transaction is likely in the wrong account.
  21. Last Year’s Tax Return – Another area often overlooked is ensuring your last year’s QuickBooks financials (in which a tax return has already been filed) ties to the actual tax return. This is sometimes done by your CPA. QuickTrainer provides this service for many of our clients. Why is this important? Your CPA cannot conduct an accurate tax return if this is not done. Again, call us if you have questions regarding this matter.

    I will say setting a Closing Date and a Closing Date Password in QuickBooks is a GREAT way to make sure no prior year transactions change once your business data has been submitted for a tax return. This is imperative to your success and saving yourself money.

Once you have accomplished the above tasks, you are well under way towards being ready to submit your QuickBooks financial data to your CPA for a tax return. To further assist you with your preparedness, below is a list of things you will want to submit to your CPA for your tax return:

  • Most CPA's will want a backup of your QuickBooks data. Work with your CPA to determine if they want an Accountant's Copy backup or a Portable backup. Make sure to let your CPA know the version year of QuickBooks you use, as well as the Admin password for your QuickBooks file. 
  • If for some reason your CPA does not use QuickBooks and requires hard-copy reports you should provide them with:
    • Balance Sheet - Cash Basis - as of 12/31/2011
    • Balance Sheet - Accrual Basis - as of 12/31/2011
    • Profit & Loss Statement - Cash Basis - for the year 2011
    • Profit & Loss Statement - Accrual Basis - for the year 2011
    • A/R Aging Summary - as of 12/31/2011
    • A/P Aging Summary - as of 12/31/2011
    • General Ledger Report - for the year 2011
  • A copy of the front page of your bank statement(s) ending on December 31st (or very close to this date).
  • A copy of the front page of your credit card statement(s) ending on December 31st (or a date closest to this date; it may be 12/20 or it may be 01/07)
  • A copy of the December Bank and Credit Card Reconciliation Report
  • Copies of receipts for purchases made during the prior year for greater than $1K
  • Copies of loan balances as of year-end
  • Copies of your W-2's and W-3
  • Copies of your 1099's and 1096
  • Copies of your payroll forms filed throughout the year (e.g., 941's, 930, NC-5, NCU101)

While this blog posting certainly does not include every conceivable scenario, I have attempted to layout for you, the reader, some very common areas to review. I hope you find the above information helpful this year and in years to come.

As always, if you have any questions or need some outside help, QuickTrainer is here for you. Call us at 910-338-0488 or send us an email at