Balancing at Year End

I do not know what part of the balance sheet reads to what part of the P&L.

Also, What should I look for when balancing? I know about bank balances, AR & AP. What else?

What should I do at year end?


Hello,

Great question, thank you.

The net income on the profit and loss statement should match to the net income shown on the balance sheet (under equity) for the same time period. For a calendar year end this would be 12/31/09.

When balancing (or to tie-out) at year end you are basically making sure that all the account balances showing on the balance sheet match to the balances on your statements. For example:

You bank account should be reconciled through 12/31/09 and the amount shown on the balance sheet at 12/31/09 should match to the reconciled bank statement balance at 12/31/09.

The Accounts Receivable balance shown on the balance sheet should match to the Aged Accounts Receivable Report balance showing at 12/31/09.

The Accounts Payable balance shown on the balance sheet should match to the Aged Accounts Payable Report balance showing at 12/31/09.

All asset balances and accumulated depreciation showing on the balance sheet should match to the asset/depreciation schedule of your tax return at 12/31/09. Along with the depreciation expense showing on the profit and loss statement.

All credit cards should be reconciled through the end of the year and the account balances shown on the balance sheet should match to the reconciled credit card statement balances at 12/31/09.

All notes and loans payable on the balance sheet should match to the balances due shown on the statements at 12/31/09.

Any payroll taxes payable on the balance sheet should match to the payroll forms 940, 941, De6 and De7 as applicable. While all payroll wages and employer tax expenses shown on the profit and loss statement should match to the same reports at 12/31/09.

The sales tax payable on the balance sheet should match to 4th quarter sales and use tax form if not paid before 12/31/09.

Thanks again for your great question!

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