PREPARING QUICKBOOKS FOR YOUR 2009 TAX PLANNING & PREPARATION
By Libby Smith, QuickBooks Professional Advisor, Accounting for Success, PC
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There's a quote that hangs over the Moscow Ballet that says, "The difficult must become habit, the habit easy, and the easy beautiful." How does a motivational quote for ballet dancers relate to entrepreneurs and year-end tax planning and preparation? The correlation is that if you repeatedly do what's difficult, it will become easier, and eventually become balanced and effortless. The secret is to use a 4-step process at the end of every month so that you have a routine. The beauty is that it's the same process that's used at year-end to prepare the books for your accountant's work on the company tax return. If you begin now to have your books in order through October or November, your accountant can also have a good set of information to do year -end tax planning. And next year, if you'll do this each month, when you get to December, the beauty is that you aren't scrambling in March or September to meet tax deadlines.
Clients tell me it's a real eye opener when I tell them that the company tax return is organized around the Balance Sheet and Income Statement (P&L). So, all you need to do is have your books in good order, and the tax planning and preparation will flow from that timely and accurate set of books. Here are the steps I recommend :
- Reconcile each Balance Sheet account so you can be assured that the balances are correct. A lot of people don't realize that you can use the Reconcile feature in QuickBooks to reconcile any Balance Sheet account.
- Start out by checking that last year's year-end Balance Sheet matches the tax return. You've got to start from a solid foundation, so if they don't match, take the time to fix and get accurate.
- Begin with the Assets-you probably already reconcile your bank accounts. Look beyond those to the other asset accounts such as prepaids, advances, and fixed assets. Check A/R and make corrections.
- Next, reconcile the Liability accounts-many people reconcile their credit cards, and if you don't, year-end is a great time to begin. Here you'll have payroll liabilities and customer deposits. Check A/P and make corrections.
- For Equity accounts, you want the Opening Balance Equity to be zero, and to be sure that partner and owner capital accounts are accurate.
- To check for accuracy in the P&L, run the P&L Detail Report.
- This will show you all the detail of the transactions in each Income and Expense account. Look through it carefully and edit transactions that have been posted to the wrong account.
- Look for transactions that should be posted to the Balance Sheet, such as large equipment purchases, or owner-related transactions.
- Run the Financial Statements, review and share them with the appropriate people on your team. You can really benefit from having different eyes help review the statements and make any corrections. Next, run the final set of reports.
- Close the books for the period. This is done in QuickBooks under Edit, Preferences, Accounting. Fill in the closing date and a password. This will insure that changes won't be made once the books are closed.
Author Credit: Libby Smith, Accounting for Success PC, 303-799-9111, x-220. |
