QuickBooks Year end Check List

QuickBooks is a user-friendly product designed to simplify the bookkeeping process.  However, since many small businesses do not employ accomplished bookkeepers, the QuickBooks data files often contain data entry errors. 

 

Efficiently locating and correcting these errors will significantly reduce the time and cost of tax return and financial statement preparation.  This checklist is designed to allow you to do most of the locating and correcting.  It's based on the premise that, at year end, each balance sheet amount should agree with an independent data source.

 

 > Bank Account(s) - Agree the checking account balance with the reconciled

       (manual or QuickBooks) bank statement.

 

 > Accounts Receivable -  Print an A/R Summary.  Agree the total of the report to the

      balance sheet amount.  Review the A/R Summary for negative amounts or old,

      uncollectible amounts.   Apply unapplied credits to invoices. Write off bad 

      debt.   Prepare debit or credit memos as necessry.

 

  > Inventory -  Adjust the inventory account to agree to the year-end physical

       inventory.  (Usually, the offsetting entry to the increase or decrease to

       inventory is coded to cost of goods sold.

 

  > Fixed Assets - Drill down (double click on the balance sheet amount) and print

       the account activity for the year.  Consider recoding small (<$200) amounts to

       a small tools and equipment account.  Does the account(s) correctly reflect the

       full costs of major purchases during the year?  If not, locate the transaction

       and recode it to Fixed Assets.  If there is financing involved, either copy the

       purchase/financing agreement for your tax preparer, or expand the original

       transaction entry to include the full cost and liability.

 

 > Undeposited Funds - This account/amount should reflect $ received in late

       December and not yet deposited.  Older amounts indicate that the correct

       sequence of create invoice/receive payment/make deposit was not completed

       and that the actual deposit was recorded erroneously as a sale.  Replace the

       actual deposit with a deposit through the banking/make deposit screen.

 

 > Other Assets - Agree the balance sheet amount(s) to underlying data/documents.

 

 > Accounts Payable - Print an A/P Summary Report.  As with A/R, agree the total to

       the balance sheet amount.  Review the list for negative or old unpayable 

       amounts.  Apply unapplied debit memos, and prepare debit or credit memos as

       necessary.

 

 > Payroll liabilities -  Balance(s) should reflect amounts owed at year-end to IRS,

      Dept. of Revenue, and other agencies for payroll taxes and expenses.  Agree

      amounts to 4th quarter and year end payroll reports and $ actually paid in

      January to these agencies.  If you are processing payroll through QuickBooks,

      also print a payroll liability report and adjust liabilities as necessary to reflect

      the correct balances.

 

 > Notes and contracts payable - Agree balance sheet amounts with lenders'

       year end statements or amortization schedules. Prepare journal entry(s)

       to adjust to correct balances due.  The offsetting side of entry to increase

       or decrease balance is interest expense.

 

 > Opening balance equity - This account is a "clearing account" most often used

       by the QuickBooks program as part of creating opening balances, or in

       allowing you to complete a bank reconciliation with unidentified differences.

       Drill down on the balance and review the transactions for the entire year.

       Recode where possible.  Otherwise, print the detail and make notations re:

       the source/reason for each entry for your tax preparer.

 

 > Retained Earnings - This account represents accumulated net earnings by the

       company from inception to the beginning of the accounting year.  If a corporate

       income tax return is prepared, this amount should agree with the amount

       shown as Retained Earnings on page 4 of the prior year corporate tax return.

       Any difference is attributable to 1/your not recording the tax preparer's year

       end adjustments for 2008, or 2/ your making, editing, or deleting 2008

       transactions during 2009.  Printing a 12/31/08 balance sheet and comparing

       it to the corporate tax return balance sheet will show the source of the

       differences attributable to #1.  Printing a closing date exception report will

       detail any differences attributable to #2.

 

 > Net income - Print a profit and loss statement for the year.  At modify report,

       check prior year box and at fonts and numbers tab, check without cents box.

       You will produce a comparative (2010 and 2009) profit and loss report.  Scan

       the report for major differences in amounts between the years, or for line

       items for which $ amount seems questionable or out of line.  Drill down to

       the detail.  Identify and correct any miscoded items.