Year-End Accounting Checklist

Bank balance to book balance for each operating account, every credit card, and every loan or line of credit. Document deposits in transit, outstanding checks, and stale uncleared items. Items uncleared more than 60 days go on a flag list for partner review — the lazy-close pattern is letting these accumulate until cash position is unreadable.

A/R aging to GL receivables, A/P aging to GL payables, inventory perpetual to GL inventory. Differences over $500 explained on a workpaper. Common gotcha: voided checks reissued in the next period throw the A/P tie; pull the voided-check log before chasing the variance.

Payroll accrual through Dec 31, uninvoiced revenue, prepaid amortization, deferred revenue per ASC 606, bonus accrual, and depreciation. Every AJE carries a memo and supporting workpaper — partners block the close until populated. Plugs to retained earnings without explanation are the year-end smell of hidden errors.

M-1 / M-3 schedule, fixed-asset roll-forward, basis schedules for every S-corp shareholder and partner, state apportionment data, and R&D credit substantiation. Without basis schedules an IRS audit blows up the loss deductions on the K-1s.

110% of prior-year liability if AGI exceeded $150K, otherwise 90% of current year. State estimates and pass-through entity tax (PTET) elections by state deadline — several states have December cutoffs that are easy to miss when the federal date dominates the calendar.

SSARS preparation, compilation, review, or audit determines independence requirements and PBC depth. Bookkeeping for a review-engagement client is an independence breach under most state-board interpretations — a common failure in cross-selling firms.

Sum of the four 941s ties to the W-3 transmittal totals — wages, federal income tax withholding, Social Security, and Medicare. Discrepancies trigger IRS CP-2100 notices later in the year; finding them before W-2s issue is the cheap fix.

Verify box 12 codes (D for 401(k), DD for employer-sponsored health, W for HSA), state ID numbers, and any imputed income such as group-term life over $50K and personal use of company vehicles. Distribute electronically only with the employee's e-consent on file.

Every vendor paid more than $600 for services (not goods) that is not a corporation, with the attorney and medical exceptions. W-9 on file before issuing — a missing W-9 means 24% backup withholding going forward. Pull from QBO or Bill.com using the vendor-type filter, never from raw bills.

Freeze receiving and shipping before count begins. Two-person count teams, signed count sheets, and recount any SKU with a discrepancy over 2%. Cycle-count clients still need a full physical at year-end for audit-engagement and lender-covenant purposes.

Calculate variance by SKU and in aggregate dollars. Adjustment posts to COGS, not directly to inventory, per the perpetual-system convention. Variance over 5% of inventory value triggers a root-cause investigation before the close finalizes.

Pull receiving logs, shipping records, and recent cycle counts. Document root cause on a workpaper — usually receiving errors, unbilled shipments, or shrinkage. Recurring shrinkage above the threshold is a control deficiency that goes in the management letter.

Pull aging by 30/60/90/120+ buckets and identify accounts over 90 days for collection escalation. Calculate DSO and compare to prior year — rising DSO usually signals deteriorating collections, not growth.

Reserve under ASC 326 (CECL) for larger clients or specific identification for SMBs. Write off accounts deemed uncollectible only with partner approval and documented collection efforts in the file — tax write-offs without that record fail under examination.

For audit-engagement clients, confirm balances over $25K or 10% of A/R, whichever is lower. Non-responses get a follow-up at 14 days, then alternative procedures (subsequent cash receipts testing, invoice tie-out).

Review January and February disbursements for invoices dated December — that's the unrecorded-liability test. Items over $1,000 dated before year-end accrue back to December. Common misses are utilities, professional fees, and December credit-card charges that post in early January.

Request statements from the top 20 vendors by spend. Differences over $250 investigated. Most common cause: credits applied in the vendor's system that were never posted in AP.

Cross-check Bill.com or the AP ledger against the vendor master. Any vendor paid over $600 for services without a W-9 on file gets a request before 1099 prep starts. Backup-withhold going forward if the W-9 isn't returned within 30 days.

Asset roll-forward: beginning balance + additions − disposals = ending balance, ties to GL fixed-asset and accumulated-depreciation accounts. Common gotcha: capitalized lease (ASC 842) right-of-use assets booked separately from owned assets but included in the same GL account.

Capitalize per the firm's threshold (commonly the $2,500 de minimis safe harbor). Tag every addition with class life for MACRS. Section 179 and bonus depreciation elected per asset, not per category — bonus drops to 60% in 2024 and 40% in 2025.

Disposals remove cost and accumulated depreciation, recognize gain or loss. Impairment under ASC 360 when carrying value exceeds undiscounted future cash flows. Document the disposal date and proceeds for the Form 4797 worksheet.

Pull P&L by month versus budget. Explain variances over 10% on revenue lines and over 15% on expense lines. Fathom or Spotlight Reporting handles the client-facing variance presentation directly from QBO.

Layer in known seasonality, payroll dates, debt-service payments, and Q1 estimated-tax payments through end of Q1. Float or Dryrun handles this for QBO clients without rebuilding from scratch each quarter.

Department-level revenue and expense, indexed to prior-year actuals plus growth assumptions. Headcount plan drives payroll, CapEx plan drives depreciation. Board approval before the new fiscal year starts; mid-year re-baselines are a sign the original plan never held up.

IRS Pub 4557 and Pub 5708 require paid preparers to maintain a Written Information Security Plan. Annual review covers access control, encryption (laptop FDE, portal in transit and at rest), incident response, and employee training. State data-breach notification laws (MA, NY, CA, TX) layer on top.

Audit-engagement clients trigger PBC compilation, fieldwork scheduling, and walkthrough updates. Review and compilation engagements skip most fieldwork prep but still need lead schedules and a working trial balance ready for the engagement partner.

Lead schedules, AJE log, bank confirmations, A/R confirmations, debt confirmations, legal letter, draft rep letter, and minutes. Send to the auditor 2 weeks before fieldwork in Suralink — missing items extend fieldwork and overrun the fee budget every time.

Calculate covenants per the loan agreement — typically debt-service-coverage ratio (DSCR), fixed-charge coverage, and minimum tangible net worth. Covenant breach triggers a waiver request before the lender notice deadline; document the calculation and send the compliance certificate per the loan agreement schedule.

Tie December brokerage statements to GL investment accounts. Mark-to-market for trading securities, OCI for available-for-sale per ASC 320. Document basis for tax purposes — wash-sale adjustments and short-vs-long-term holding periods both flow to the 1099-B reconciliation later.

Interest paid over $10 to any payee or over $600 to a sole proprietor requires 1099-INT. Dividends over $10 trigger 1099-DIV. Most SMBs don't issue these, but pass-through entity distributions sometimes look like dividends — confirm classification with the engagement partner before suppressing.