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Tax Time: A Year-End Checklist of Accounting Tasks

by Bonnie Biafore, author of QuickBooks 2005: The Missing Manual
03/28/2005

The typical workday is hectic enough, but the end of the year brings an assortment of additional bookkeeping and accounting tasks. Keeping on top of your bookkeeping throughout the year means you can delegate most of the year-end tasks to QuickBooks. (Though if you shrugged off your data entry during the year, even the mighty QuickBooks can't help.) Whether you handle your company's accounting on your own or hand off the major accounting tasks to an accountant, here are the tasks you'll typically want to complete shortly after the end of your fiscal year.

Link Accounts with Lines on Tax Reports

Whether your accountant has the honor of preparing your taxes or you keep that excitement for yourself, you can save accountant's fees and your own sanity by making sure your company file is ready for tax season. Before you try to use your QuickBooks company file to prepare your taxes, be sure to link each account in your Chart of Accounts to the correct tax line and tax form.

To see whether your accounts are associated with the correct tax lines and forms, choose Reports -> Accountant & Taxes -> Income Tax Preparation. QuickBooks displays a report showing every account, its type, and the tax line to which you assigned it, as shown in Figure 1.

Figure 1
Figure 1. If you see "<Unassigned>" in the Tax Line column, you'll have to assign a tax line to that account

To edit an account in QuickBooks to add the tax line, press Ctrl-A to display the Chart of Accounts. Select the account and press Ctrl-E to open the Edit Account dialog box. In the Tax Line entry dropdown list, choose the tax form for that account.

Tip: If you have no clue which tax forms go with which accounts, you can enlist QuickBooks' Easy Step Interview (covered in Chapter 1, "Creating a Company in QuickBooks," of QuickBooks 2005: The Missing Manual) for help. Run the Easy Step Interview with a bogus company name. Skip information such as address and phone number, but be sure to choose the income tax form that you use for your company tax returns and select a type of company similar to your business.

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QuickBooks 2005: The Missing Manual
By Bonnie Biafore

If you tell the wizard to create a chart of accounts, you can print that chart of accounts after you exit the interview to see which tax lines QuickBooks used. Reopen your company file and edit your accounts to assign the tax forms that QuickBooks used.

View the Trial Balance Report

The Trial Balance report is a holdover from the days of paper-based accounting. The name refers to the report's original purpose: totaling the balances of every account in debit and credit columns to see if they all matched. If they didn't, the bookkeeper had to track down the mistakes and try again.

QuickBooks doesn't make arithmetic mistakes, so you don't need a trial balance to make sure that debits and credits match. However, the Trial Balance report is the only place in QuickBooks that you can see all your accounts and their balances in the same place, so it's a great way to quickly scan every account balance for errors.

Generate Year-End Financial Reports

Preparing your company tax returns stimulates a frenzy of financial reporting, but tax forms aren't the only reason for year-end reports. It's a good idea to run year-end reports to look for numbers that don't seem right. You might have posted a deposit or payment to the wrong account or created a journal entry incorrectly. Financial reports are also helpful for analyzing your business performance.

Generate a Profit and Loss Report

Just as individuals receive W-2s to show how much money they made in a year, companies use profit and loss reports to show their net income for a given period. A profit and loss report shows income, expenses, and the resulting net income (or earnings.) Besides submitting a full-year profit and loss report with your company tax return, you can review the income accounts for products that aren't selling well or the expense accounts for ways to cut costs.

When you generate a profit and loss report in QuickBooks by choosing Reports -> Company & Financial -> Profit & Loss Standard, QuickBooks opens the Profit & Loss window, which contains a report for the current month to date. To change the report to a fiscal year report like the one shown in Figure 2, in the Profit & Loss window, in the Dates dropdown list, choose Last Fiscal Year if you generate the report after the end of your fiscal year.

Figure 2
Figure 2. In the Dates dropdown list, choose a period to generate a profit and loss report for that period

Tip: If you want to access a year-end profit and loss report more easily, memorize your year-end report as described in Chapter 14, "Working with Financial Statements," of the Missing Manual.

Generate a Year-End Balance Sheet

A balance sheet shows the assets (things you own) and liabilities (money you owe) for your company. A balance sheet report for the entire fiscal year accompanies your tax return.

Generating a balance sheet for a fiscal year is almost identical to generating a profit and loss report. Choose Reports -> Company & Financial -> Balance Sheet Standard. In the Balance Sheet window, in the "As of" box, type the last day of your company's fiscal year. QuickBooks adjusts the dates, and you're good to go.

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