Insights

Preparing to Close the Year: Key Items to Review in Your Financial Statements

November 12, 2025

With the year-end quickly approaching, the time has come to start reviewing financial statements. Here’s a brief overview of the reports to run and what to look for while preparing for tax season.

Arguably, the most important reports to run are the Balance Sheet and the Profit and Loss Statement (P&L).

The Balance Sheet provides a snapshot of the business’s financial position at a specific point in time, typically at the end of each month or year. This is useful when reviewing where one’s business stands financially, providing balances for all of the business’s assets and liabilities.
The Profit and Loss Statement will provide an overview of the business’s performance over the reporting period, including income, expenses, and general profitability. It is perfect when wanting to see where the most money was spent and what brought in the most money.

There are some crucial things every business owner should look for when reviewing the balances and totals in each statement.

Cash/Credit Card Reconciliations

A great way to start reviewing the financial statements is to reconcile the business’s bank accounts monthly. From credit cards to checking accounts, reconcile each one to make sure that all transactions are present and that there are no duplicates. If an item is missing, determine if the item just has yet to come through the bank feed or if it needs to be manually added. This helps catch missing or extra transactions early, rather than further down the line when one may forget about checks written or why a transaction was made.

Accounts Receivable and Accounts Payable

Now is also the perfect time to review Accounts Receivable (AR) and Accounts Payable (AP) balances in the Balance Sheet. Check the AP balance to make sure that outstanding amounts are not still owed to vendors and check the AR balance to make sure the business is not still owed anything in return. If there are outstanding balances in either of these accounts, determine if there is a valid reason or if it needs to be followed up on.

Fixed Assets

With tax season right around the corner, checking in on Fixed Asset accounts is crucial. Making sure that all disposals are recorded and that all assets listed in the Fixed Asset accounts belong there. A good idea would be to check other accounts, such as Repairs and Maintenance and Office Supplies, to see if there are any items over $2,500 that could potentially be considered fixed assets. Once the totals have been verified, consider working with a tax advisor to ensure that depreciation has been calculated and recorded properly.

Loans/Payables Reconciliations

Another crucial reconciliation is checking in with any payable accounts. If it’s a loan, make sure any necessary payments have been made and that the outstanding balance is reasonable. Also, ensure that interest expense is split out from the principal payment and tie the balance to a loan statement, if possible. Similarly, for other payables, make sure payments are up to date and regular. If a balance is too large, consider making some payments and staying ahead for the year-end.

Profit and Loss Review

While a lot of focus is spent on the Balance Sheet, the Profit and Loss Statement cannot be left out.

Check Repairs and Maintenance expense accounts to see if anything can be capitalized.
If classes are used, does every transaction have a class assigned?
Make sure payroll accounts tie out to any payroll reports.
Review revenue and expense accounts to confirm that all income and expenses have been properly recorded.

General Ledger

Don’t forget to check in with the General Ledger. It’s helpful to run through the General Ledger and make sure that all transactions have been recorded properly. Make sure that each transaction has a customer or vendor attached and that all transactions in each account make sense and belong there. Keeping vendors up to date makes it easier to determine which ones will need 1099s when the time comes, and who to request W-9s from.

Planning for the New Year

Finally, don’t forget to take this time to start planning and budgeting for next year. Take a look at where the most money was spent and what brought in the most money to get an idea of what is working and what can be improved. Taking the time to review these financials can be very beneficial when planning for the year to come.

For more information on year-end preparations, consider checking with our previous related articles, such as “Year-End Preparations with EAS” or “Streamline Your Business’s Year-End,” both of which go over some other key considerations when handling the coming year-end.

Also, be sure to continue along with our Entrepreneurial Accounting Solutions (EAS) team’s 4-part series for National Entrepreneurship Month, as our authors will cover the current upcoming year-end and things small business owners can expect.