YEAR-END ACCOUNTING
HOW YEAR-END WORKS
OUR SERVICE FAQs
Year-End Accounting Ontario
Professional year-end accounting in Ontario helps businesses bring together the financial activity of the completed accounting period and establish reliable closing balances.
Bank accounts, credit cards, payroll, HST, financing, assets, shareholder transactions and other financial activity may all require review before the year's accounting information can be finalized.
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Xpress Accounting provides year-end accounting services for Ontario businesses that need their financial records organized, reconciled and prepared for tax filing.
The work begins with the accounting records accumulated throughout the year and the supporting information needed to understand significant balances and transactions.
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Businesses with current bookkeeping may require relatively straightforward year-end review. Others discover unreconciled accounts, missing transactions or unexplained balances that need to be investigated before reliable year-end information can be prepared.
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The objective is to establish financial records that accurately reflect the activity of the completed period and provide a dependable foundation for the accounting and tax work that follows.
Ontario Year-End Accounting
What Is Year-End Accounting?
Year-end accounting is the process of reviewing and completing a business's accounting records at the end of its financial reporting period.
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Throughout the year, transactions accumulate through sales, purchases, payroll, banking, financing and other business activity.
Year-end brings that information together and provides an opportunity to determine whether the resulting balances are complete and understandable.
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The work can involve reconciling financial accounts, reviewing revenue and expenses, examining balance-sheet accounts and identifying transactions that require clarification or adjustment.
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For incorporated businesses, the year-end process is generally connected with the corporation's fiscal period.
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Year-end accounting is therefore more than printing an income statement from bookkeeping software. The underlying records need to support the balances being reported.
Year-End Accounting Services for Ontario Businesses
Xpress Accounting provides year-end accounting services for Ontario businesses with financial records ranging from current and well maintained to incomplete or difficult to reconcile.
The starting point depends on the condition of the books.
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A business that reconciles its financial accounts regularly and maintains appropriate supporting documents may already have a strong foundation for year-end.
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Another company may have entered transactions throughout the year without completing regular reconciliations. Differences can then remain hidden until the accounting records are reviewed more closely.
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Year-end work identifies what is ready, what requires clarification and what additional accounting information may be needed before the period can be completed.
Preparing the Bookkeeping for Year-End
Bookkeeping maintained throughout the year provides the transaction history used during year-end accounting. Before the period is finalized, the books should contain the financial activity relevant to that period.
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Missing sales, expenses, payments or transfers can affect both income-statement and balance-sheet accounts. Transaction classifications also matter. A significant equipment purchase should not remain buried among ordinary operating expenses merely because that was the category originally selected.
Money borrowed by the business should not be mistaken for revenue, and transfers between financial accounts should not create artificial income or expenses. Businesses requiring ongoing assistance maintaining their records can learn more about our bookkeeping services in Ontario.
Reconciling Bank Accounts at Year-End
Bank reconciliation is an important part of establishing reliable year-end balances. The balance shown in the accounting system should be compared with the corresponding external bank information.
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Differences can arise from missing transactions, duplicated entries, transactions recorded for incorrect amounts or activity assigned to the wrong account.
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An unresolved difference should not simply be eliminated through an unexplained adjustment so that the balances appear to agree.
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Where possible, the transactions responsible for the discrepancy should be identified. This preserves the integrity of the accounting history and reduces the chance that the same problem will continue into the next financial period.
Reviewing Revenue and Sales
Year-end accounting includes reviewing the revenue recorded for the completed period.
The records should reflect the sales activity of the business based on the accounting information available.
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Bank deposits alone may not provide a complete revenue history. Customer payments can be received after an invoice is issued, several payments may be combined into one deposit and payment processors can deduct fees before transferring funds to the business.
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Other deposits can represent financing, shareholder advances, transfers between accounts or refunds rather than revenue. Understanding the source of significant deposits helps prevent unrelated cash movements from being incorrectly included in business income.
Reviewing Credit Cards at Year-End
Corporate credit-card accounts also require attention. The accounting records should reflect the purchases made through the card as well as payments made against the card balance.
Problems can develop when card payments are recorded as additional expenses even though the individual purchases have already been entered.
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Transactions can also be duplicated through imports or bank feeds, while individual purchases may be missing entirely. Year-end review provides an opportunity to reconcile the recorded credit-card balance with available statements and investigate differences. Personal purchases made using a corporate card should also be identified rather than automatically treated as business expenses.
Reviewing Business Expenses
Expenses recorded throughout the year should also be reviewed for completeness and appropriate classification. The fact that money left a business bank account does not automatically establish that the payment represents a deductible operating expense.
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Loan payments, transfers, shareholder transactions and purchases of significant assets can all appear as withdrawals while requiring different accounting treatment. Supporting documents can help establish what the business purchased and why the transaction occurred.
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Where expenses were paid personally by a shareholder or owner, the transaction may also need to be reflected even though no payment appears in the corporate bank account.
Year-end review helps bring these different sources of financial activity together.
Accounts Receivable at Year-End
Businesses that invoice customers may have amounts outstanding at year-end. Accounts receivable should be reviewed to determine whether recorded customer balances remain consistent with the underlying sales and payment history.
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Old receivables deserve particular attention. An amount can remain outstanding because the customer has not paid, but it can also persist because a payment was applied incorrectly, a credit was not recorded or the bookkeeping contains another error.
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Understanding the reason for older balances provides more useful information than simply carrying them into another year. The appropriate accounting and tax treatment of specific receivables depends on the circumstances surrounding them.
Accounts Payable and Unpaid Business Costs
Amounts owed to suppliers can also affect year-end records. Where accounts payable are maintained, outstanding balances should correspond with legitimate obligations of the business.
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Old balances can sometimes remain after an invoice has already been paid or otherwise resolved. Conversely, business costs relating to the completed period may not yet appear in the accounting records if the relevant invoice or information has not been entered.
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Reviewing supplier balances helps determine whether the books provide a reasonable representation of amounts owed at the end of the period. Supporting invoices and statements can be particularly useful where discrepancies exist.
Payroll Accounts at Year-End
Payroll affects several areas of the accounting records. Employee earnings are only one component. Payroll deductions, employer amounts, employee payments and remittances can create additional transactions and balances. The payroll information accumulated during the year should correspond reasonably with the amounts represented in the company's bookkeeping.
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If the accounting system contains only net payments to employees, payroll expenses and related accounts may be incomplete. Year-end reconciliation can compare available payroll reports with the general ledger and investigate differences before the accounting period is finalized. Ontario employers requiring ongoing assistance can review our payroll services in Ontario.
Reviewing HST Accounts
For businesses registered for GST/HST, the accounting records can include tax collected on sales, tax associated with eligible purchases and payments or refunds relating to filed returns.
These activities should remain distinguishable from ordinary revenue and expenses.
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For example, an HST payment should not automatically become another operating expense simply because the payment left the corporate bank account. Year-end review can help determine whether HST-related balances in the books correspond with the underlying accounting information and available filings.
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Unexplained differences should be investigated rather than routinely carried into another period. Businesses needing broader information about Ontario HST obligations can review our Ontario HST guide.
Assets Purchased During the Year
Businesses may purchase vehicles, computers, furniture, equipment, machinery or other significant property during the year. These transactions deserve attention during year-end accounting.
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A large purchase may have been recorded initially in an ordinary expense category even though the nature of the transaction requires further consideration. Invoices and purchase agreements can help establish what was acquired, the transaction date and the amount involved.
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Financing can add another layer. Where property was acquired through a loan or financing arrangement, the accounting records should distinguish the acquisition itself from the liability and subsequent payments associated with financing it.
Loans and Business Financing at Year-End
Borrowed funds should remain identifiable within the accounting records. Receiving financing increases cash but does not make the borrowed amount ordinary business revenue.
Likewise, payments relating to financing should be understood according to the underlying arrangement rather than automatically categorized based on the bank withdrawal.
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Year-end review can involve examining loan balances and available financing documents to determine whether the accounting records reasonably reflect the arrangement.
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New borrowing during the year deserves particular attention because the original receipt of funds and subsequent payments may have been recorded through several different transactions. Clear financing records also make it easier to understand liabilities being carried into the following period.
Shareholder Balances at Corporate Year-End
Owner-managed corporations frequently have financial transactions involving shareholders.
A shareholder may advance personal funds to the corporation, personally pay a corporate expense, receive money from the corporation or have the corporation make a payment on the shareholder's behalf.
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These transactions can affect the shareholder loan account. At year-end, the balance should be reviewed to determine what it represents and whether the corporation owes the shareholder or the shareholder owes the corporation.
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The transaction history and timing can be particularly important where money is owed to the corporation because Canadian shareholder-loan tax rules may apply. Business owners can learn more in our shareholder loan accounting guide.
Reviewing the Balance Sheet
The balance sheet contains accounts whose amounts can continue from one year into the next. This makes year-end review particularly important. Cash, receivables, credit cards, loans, shareholder balances and other assets or liabilities should be understandable based on the available accounting information.
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An unexplained balance does not become correct merely because it appeared in the previous year's books. Historical amounts can sometimes continue for several years because nobody investigated their origin. Reviewing these accounts at year-end can identify balances requiring clarification before they are carried forward again.
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Where significant historical discrepancies exist, additional accounting cleanup may be necessary.
Reviewing the General Ledger
The general ledger provides detailed information about transactions recorded within individual accounts. Reviewing that detail can reveal issues that are difficult to identify from financial-statement totals alone. An expense account may contain a large purchase that appears unusual compared with the other transactions.
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A revenue account can contain a deposit that actually represents financing or a transfer.
An account that should normally contain regular activity might unexpectedly show no transactions for several months. Year-end review uses these patterns as signals for further investigation.
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The purpose is not to question every transaction indiscriminately but to identify items that do not appear consistent with the account in which they were recorded.
Year-End Accounting Adjustments
Year-end accounting can require adjustments after the underlying records have been reviewed. An adjustment should have a reason. It may correct a bookkeeping error, recognize information that was unavailable when an original transaction was entered or reflect year-end accounting treatment based on the financial circumstances of the business.
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Adjustments should not become a substitute for investigating unexplained discrepancies.
Forcing a bank balance to agree through a miscellaneous entry, for example, can hide the fact that transactions are missing or duplicated. Where the underlying issue can be identified, correcting the cause generally provides a clearer accounting history than simply eliminating the difference.
What If the Books Do Not Reconcile?
Not every business reaches year-end with clean accounting records. Bank accounts may not reconcile. Credit-card balances can be wrong. Payroll may disagree with the general ledger, or old balance-sheet amounts may have no obvious explanation.
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The amount of work required depends on the extent and history of the discrepancies.
A recent isolated problem can sometimes be traced quickly. Accounting records containing several years of unresolved balances may require a broader investigation of historical statements, transactions and supporting documents.
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Xpress Accounting provides accounting cleanup services in Ontario for businesses that need inaccurate or unreconciled records investigated before dependable year-end information can be prepared.
Supporting Documents for Year-End Accounting
Year-end accounting often requires information beyond the transactions appearing in bookkeeping software. Bank and credit-card statements help support account reconciliations.
Invoices and receipts provide information about purchases. Financing agreements can explain loans and related payments, while payroll reports provide details that may not be visible from employee bank deposits.
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Documents relating to significant assets and shareholder transactions can also be important.
The exact records required depend on what occurred during the year and the condition of the existing bookkeeping. Maintaining documentation as transactions occur is considerably easier than trying to reconstruct the financial history months or years later.
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Businesses can review our CRA business records requirements for broader information about recordkeeping.
Year-End Accounting for Incorporated Businesses
Incorporated businesses have financial records that belong to the corporation as a separate legal entity. Corporate revenue, expenses, assets, liabilities, payroll and shareholder activity should therefore remain identifiable within the corporation's accounting records.
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The corporation also operates according to its fiscal period for income-tax purposes.
Year-end accounting brings the activity of that fiscal period together so that closing balances can be established and the resulting financial information can proceed into corporate tax preparation.
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As corporations grow, this process can become more involved. Additional bank accounts, employees, financing, equipment and transaction volume create more financial information requiring reconciliation and review.
Year-End Accounting and Corporate Tax Preparation
Year-end accounting and corporate tax preparation are closely connected, but reliable tax preparation depends on understanding the financial records first. The accounting process establishes the revenue, expenses, assets, liabilities and other financial information associated with the corporation's fiscal period.
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Corporate tax work then uses that information together with the tax rules applicable to the corporation. Where bookkeeping is incomplete or balances remain unexplained, additional accounting work may be required before dependable tax information can be prepared.
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Xpress Accounting provides corporate tax accountant services in Ontario for incorporated businesses requiring year-end and corporate tax assistance.
Preparing for a Business Year-End
Businesses can make year-end considerably easier by keeping accounting records current throughout the year. Regular bank and credit-card reconciliation reduces the number of historical differences requiring investigation.
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Supporting documents should be retained for significant purchases, financing and unusual transactions rather than collected only when year-end begins. Shareholder transactions should also remain identifiable.
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If the owner puts money into the company or receives money from it, understanding the transaction when it occurs is easier than reconstructing its purpose several months later.
The same principle applies to payroll and HST.
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Regular accounting creates continuity so that year-end becomes a review and completion process rather than a reconstruction exercise.
What Happens After Year-End Accounting?
Once the accounting records for the completed period have been reviewed and the necessary issues addressed, the resulting financial information can support the next stages of the business's accounting and tax responsibilities.
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For corporations, that includes preparation of the corporate income tax return. The closing balances also become part of the accounting history carried into the next fiscal period where appropriate.
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This continuity makes accurate year-end work important beyond the return being prepared immediately afterward. An unexplained balance carried forward today can become next year's opening accounting problem.
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Ontario corporations looking for information specifically about the return itself can review our corporate tax return guidance.
Year-End Accounting Services From Xpress Accounting
Xpress Accounting provides year-end accounting services to Ontario businesses requiring financial records reviewed and prepared for the completion of their accounting period.
The work is based on the actual condition of the books.
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Businesses with current reconciled bookkeeping may be ready for year-end review with relatively little preliminary work. Businesses with incomplete records can require missing information to be gathered, while unreconciled or inconsistent books may require additional investigation before reliable closing balances can be established.
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Xpress Accounting can review banking, credit cards, payroll, HST, financing, shareholder activity and other relevant accounting information according to the circumstances of the business. Ontario businesses that need assistance completing their accounting year can contact Xpress Accounting.
Frequently Asked Questions
Q: What is included in year-end accounting?
A: Year-end accounting can include reviewing bookkeeping, reconciling bank and credit-card accounts, examining revenue and expenses, reviewing assets and liabilities, checking payroll and HST accounts, reviewing shareholder activity and making appropriate accounting adjustments. The work required depends on the business and condition of its records.
Q: Do my books need to be reconciled before year-end?
A: Reconciled books provide a stronger starting point for year-end accounting. Where accounts do not reconcile, the differences may need to be investigated before reliable closing balances can be established.
Q: What records are needed for business year-end accounting?
A: The records depend on the business but can include bookkeeping information, bank and credit-card statements, invoices, receipts, payroll reports, HST information, financing documents and records relating to significant purchases or shareholder transactions.
Q: Can Xpress Accounting help if my bookkeeping is behind or incorrect?
A: Yes. The existing records can be reviewed to determine what is incomplete or unreliable. Depending on their condition, additional bookkeeping or accounting cleanup may be required before year-end accounting can be completed.
Year-end is the point where a full period of business activity comes together.
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Revenue and expenses are part of that picture, but so are bank balances, credit cards, payroll, HST, assets, financing and amounts involving shareholders.
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Each account contributes information about what occurred during the year and what the business carries forward into the next period.
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Reliable year-end accounting therefore depends on more than producing reports from accounting software.
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The underlying transactions need to be complete, significant balances need to be understandable and discrepancies should be investigated where possible.
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Xpress Accounting provides year-end accounting in Ontario for businesses that need their financial records reviewed, organized and prepared for the accounting and tax work that follows.
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Businesses ready to complete their financial year can request an accounting consultation.