Year-End Accounting Checklist: 25 Steps to Close Your Books (2026)

Updated March 2026 · 15 min read · 170 monthly searches

Phase 1: Reconciliations (Steps 1-7)

✅ 1. Reconcile All Bank Accounts

Match every bank statement to your books through December 31. Every penny must be accounted for. No exceptions.

✅ 2. Reconcile Credit Card Statements

All business credit cards reconciled through year-end. Ensure all charges are categorized correctly and personal charges are excluded.

✅ 3. Reconcile Petty Cash

Count the physical petty cash fund. Match it to the GL balance. Investigate and adjust any discrepancies.

✅ 4. Reconcile Accounts Receivable

Run an AR aging report. Confirm all outstanding invoices are real and collectible. Write off uncollectible amounts (bad debt expense).

✅ 5. Reconcile Accounts Payable

Ensure all bills received through year-end are recorded. Accrue for goods/services received but not yet billed.

✅ 6. Reconcile Payroll Liabilities

Verify payroll tax liabilities match what's been remitted. Ensure all payroll for the year is recorded in the correct period.

✅ 7. Reconcile Loan Balances

Verify loan balances match lender statements. Ensure interest expense is properly accrued through December 31.

Phase 2: Adjustments (Steps 8-15)

✅ 8. Record Depreciation

Calculate and post annual depreciation for all fixed assets. Update the depreciation schedule. Consider Section 179 expensing or bonus depreciation for new assets.

✅ 9. Adjust Prepaid Expenses

Recognize the portion of prepaid expenses consumed during the year (insurance, rent, subscriptions paid in advance).

✅ 10. Accrue Unpaid Expenses

Record expenses incurred but not yet paid: utilities, professional fees, commissions earned but not yet paid.

✅ 11. Review Deferred Revenue

For services not yet delivered (e.g., annual subscriptions collected upfront), ensure only the earned portion is in revenue. The rest stays in deferred revenue on the balance sheet.

✅ 12. Adjust Inventory

If applicable, perform a physical inventory count. Adjust the GL to match the physical count. Write off obsolete or damaged inventory.

✅ 13. Review Revenue Recognition

Ensure all revenue is recorded in the correct period. Revenue earned in December but billed in January should appear in this year's books.

✅ 14. Post Intercompany Entries

If you have related entities, reconcile and post all intercompany transactions. Ensure balances net to zero.

✅ 15. Record Owner Contributions and Draws

Ensure all owner/partner contributions and distributions are properly recorded and classified (not as expenses).

Phase 3: Review & Verify (Steps 16-20)

✅ 16. Run Trial Balance

Generate a trial balance and review every account. Does each balance make sense? Are any accounts negative that shouldn't be?

✅ 17. Review the P&L for Anomalies

Compare to last year and to budget. Investigate variances greater than 10%. Are any expenses miscategorized?

✅ 18. Review the Balance Sheet

Every balance sheet account should represent a real asset, liability, or equity balance. Clear out any "suspense" or "miscellaneous" accounts.

✅ 19. Verify Chart of Accounts Cleanliness

Inactivate accounts no longer in use. Merge duplicates. Ensure account types are correct.

✅ 20. Review 1099 Vendor List

Identify all vendors paid $600+ during the year who need 1099s. Verify their W-9 information is on file.

Phase 4: Tax Preparation (Steps 21-25)

✅ 21. Maximize Deductions

Last chance to:

• Make retirement plan contributions (SEP-IRA deadline extends to tax filing)
• Purchase equipment for Section 179 expensing
• Pre-pay deductible expenses
• Make charitable contributions

✅ 22. Prepare W-2s and 1099s

Deadline: January 31. File W-2s for employees and 1099-NEC for independent contractors. Late filing = penalties.

✅ 23. Calculate Estimated Tax Obligations

For pass-through entities, estimate the tax liability so owners can plan their Q4 estimated payment.

✅ 24. Create Year-End Financial Package

Compile for your CPA or tax preparer:

• Income statement (P&L)
• Balance sheet
• Trial balance
• Bank reconciliations
• Depreciation schedule
• Loan amortization schedules
• Equity rollforward

✅ 25. Close the Books

Once everything is reviewed and approved:

1. Post closing entries (transfer net income to retained earnings)
2. Lock the period in your accounting software
3. Save a backup of the year-end data
4. Archive supporting documents

Year-End Close Timeline

The Advisory Opportunity: Year-End Close Services

Year-end close is premium advisory work:

• Year-end close package: $1,500-$5,000 per client (depending on complexity)
• Tax planning consultation: $500-$2,000 (October-November)
• 1099 preparation: $200-$500 per client
• Financial review meeting: Present results to owners — builds trust and retention

This is high-value, recurring, seasonal work that every business needs. It's also the perfect gateway to monthly advisory services — "Let's not wait until December to talk about your finances."