2022 Year-End Accounting Checklist

It is that time of year again. To ensure there are no surprises or hiccups in preparing for tax season and closing your books for the year, Optima has created a year end checklist so no stone goes unturned!

You can find the downloadable checklist Here

• Accounts Receivable
  • Reconcile accounts to ensure balance sheet amount agrees with customer aging detail.
  • Write off any identified uncollectable accounts and establish an overall reserve methodology based to apply to 30, 60, and 90+ day aggregate balances.
  • Make a push to receive payment for past due A/R.
    
    
• Accounts Payable
  • Extend the normal A/P close date until later in January to ensure that all the current year invoices are captured as a current year expense.
  • Communicate this in advance to team members.
  • Accrue any material expenses that you have incurred but haven’t received an invoice for.
  • Run a year-end vendor aging and ensure it matches the balance sheet.
  • Request a statement of open balance from your major vendors to ensure you are not missing any bills
    
    
• Inventory
  
  • Perform a year-end inventory as close as possible to the end of the year.
  • Review inventory for slow moving and obsolete inventory and create an inventory reserve or write-off the inventory.
  • Schedule and perform an inventory count then prepare the necessary adjustments in your accounting system.
    
    
• Prepaid Expenses
  • Run an analysis on any prepaid expense balances and ensure the amount recorded on the balance sheet reflects what will be expensed the following year.
    
    
• Deferred Revenue
  • If your company has deferred revenue, make sure the ending balance is enough to cover the deferral amount for the following year or years.
    
    
• Accrued Payroll
  • Book an accrual to ensure that 365 days of labor have been expensed to the current year. Although you likely book monthly payroll accruals, it is a good practice to take a step back to make sure that 26 weeks have been properly accounted for.
    
    
• Bank Reconciliation
  • Perform the final reconciliation for the year, and clearly document items in transit that will carry over to the next year.
  • Investigate any stale checks that were written but haven’t cleared and reach out to payees to coordinate any necessary check replacement.
  • If you maintain petty cash or cash drawers, make sure to count the cash in these locations agree with applicable cash accounts on the balance sheet.
  • Request that office staff submit final receipts for petty cash used for reconciliation purposes.
  • If you use multiple subsidiary accounts, prepare a year-end cash sweep journal entry if needed.
  • Ensure that the balance in Undeposited Funds clears shortly after the year end and no duplicate deposits were posted.
    
    
• Payroll
  • If you’ve received a notice from Employment Development Department (EDD) with updated employer contribution rates, make sure to forward to your payroll provider.
  • If your company processes payroll for your employees, make sure the person responsible has the correct rates.
  • Send out an email to your employee’s requesting an update if they’ve changed mailing addresses. You will need updated address information when sending out W2’s.
  • Determine if your payroll provider is mailing the W2’s or if you are responsible for printing so that you can be prepared with the proper forms
  • Review any payroll adjustments that need to be submitted before 12/31/2022.
  • Have a calendar of the federal holidays and ensure that payroll is processed on time to deposit on scheduled dates.
    
    
• Loans
  • Reconcile the ending loan amount to the balance sheet and book any necessary interest or principal adjustments to ensure consistency.
  • If taxes or insurance are escrowed, reconcile restricted cash to make sure it matches the lender’s escrow statement.
  • Make any necessary adjustments to differentiate between current and long-term portions of debt
    
    
• Capital Leases
  • If your company has capital leases, make sure all payments are booked and reconcile the lease statements with the long-term and short-term lease balance sheet accounts.
    
    
• Fixed Assets
  • Update the Fixed Asset listing to properly reflect any new acquisitions or dispositions and make sure the proper depreciation is recorded for each asset.
  • Pay special attention to assets that have fully depreciated during the year and make sure a negative book value is inadvertently created.
  • Use the ending Fixed Asset listing to establish the beginning depreciation expense for the following year.
    
    
• Vendors & Contractors
  • Review charitable contributions and receipts. If you haven’t received a receipt, reach out to the charitable organization and they should be happy to provide one for your records.
  • Review your checking account for outstanding payments to vendors and contractors. If necessary, request that your bank place a stop payment order on the payment and re-issue before end of year.
  • Review and prepare for possible 1099s. Make sure you have valid W-9s on file for all. If you will be filing the 1099s, decide if you will file electronically. If filing on paper, order the proper 1099 forms ahead of time (1099—MISC, 1099-NEC, 1099-INT).
    
    
• Close Year in Accounting System
  • Once the year has been fully closed, make sure to properly end the year in the financial/accounting software so that retained earnings and starting balance sheet amounts are carried over to the following year. Run a final trial balance and publish financial reports. If an audit is to be performed, wait until the audit is complete and issued before closing the year in the system.
    
    
• 2023
  • Begin preparation of next year's budget