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2022 Year-End Accounting Checklist

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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!

Link to the downloadable Checklist is 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

 


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