Insights

Year-End Preparations with EAS

November 25, 2024

As the end of the year approaches, McKonly & Asbury’s Entrepreneurial Accounting Solutions (EAS) team is busy preparing for year-end close and tax filings. Their goal is simple: To have financials reconciled and reviewed, making tax compliance a breeze. Read on for more information on how our EAS team works with clients, internal accounting teams, and CFOs to make sure their financials are buttoned up and in accordance with tax rules.

Year-End Request List

Year-end request lists can be lengthy. However, when accountants have complete information, they are better equipped to complete a full financial statement overview, ensuring year-end reporting accuracy. EAS collaborates with M&A’s Tax team to make sure business expenses are recorded and follow IRS guidelines. The teams work together to verify that the client has received available tax benefits and that transactions are recorded in the most beneficial and compliant manner.

As tax forms arrive in early 2025, it is important to find a safe place to file them for tax preparation. Common forms include Forms 1098, 1099, and W2. Any finance or tax-related documents should be provided to the accountant for further review.

Balance Sheet Review

One of the main tasks completed at year-end is reconciling various accounts on the financial statements. It is vital to reconcile items on the Balance Sheet, which provides a picture of the company’s financial health. If accounts are not reviewed and balances confirmed, it creates a potential for the company’s Balance Sheet to be reported inaccurately.

To complete the reconciliation process, EAS requests bank, credit card, and loan statements. EAS uses statements to compare what is recorded in the accounting software with what is listed on the bank statement; variances are identified and reviewed. Below is a list of commonly reconciled accounts:

Checking, Savings, and Petty Cash Accounts
Credit Cards
Loan and other Liabilities

Other Balance Sheet accounts that are also reviewed include:

Fixed Assets – For purchases over $2,500, EAS may request invoices to review for capitalization criteria.
Accumulated Amortization and Depreciation – Along with Fixed Assets, applicable amortization and depreciation is recorded and tied out to the Fixed Assets software.
Accounts Receivable (A/R) – If a client uses a separate sales system, EAS ties out the A/R balance in the accounting software to the balance in the system to ensure they match. Outdated outstanding balances are also reviewed for potential write-offs.
Accounts Payable (A/P) – This is reviewed with the client to confirm the accuracy.
Inventory – Inventory should be counted, valued, and any adjustments should be recorded.
Prepaids – All prepaid expenses, such as health insurance, should be recorded, and the prepaid balance should tie to a schedule.
Payroll Liabilities – These balances are reviewed to ensure they accurately reflect what is owed.

Profit & Loss Review

The Profit & Loss (P&L) report is also reviewed thoroughly at year-end. Revenue transactions are reviewed to confirm that all income has been recorded appropriately and that expenses are not mistakenly categorized to a revenue account. Forms 1099-K, 1099-MISC, or 1099-NEC may be requested from the client. EAS uses these to compare the total of the forms to the total revenue, breaking out applicable refunds and merchant fees. Form documented revenue should be greater than or equal to total revenue reports on 1099s.

Expense transactions are also reviewed for accuracy. Common areas that EAS reviews include the following:

Repairs & Maintenance accounts are reviewed for potential fixed asset capitalization.
Vendor names should be included on each expense transaction to ensure that 1099 filings are accurate.
Payroll wages and taxes are tied out to payroll reports. Clients should also confirm that year-end payroll filings are complete.
If class tracking is used, a P&L by Class report should be reviewed to ensure that all transactions have classes.
The P&L report may also be adjusted so that it is in EBITDA (earnings before interest, taxes, depreciation, and amortization) format. This moves certain income and expense accounts to a bottom section on the P&L to provide the net income without those transactions.
The P&L and Balance Sheet may also be compared to the prior year to provide a clearer picture of fluctuations from the prior year to the current year.

Year-end is a busy time filled with holidays, school concerts, and other fun activities. For EAS, it is also time used to best prepare for January tasks of finalizing year-end financials, filing 1099s, and preparing information for tax return filings. With collaboration with clients, EAS can be successful in providing complete and accurate financial data for the year. For more information or to partner with the team to ensure your financials are complete, reach out to Rebecca Lauffer or Michelle Earley.