Year-end adjustments are the entries that bring the books in line with what the return needs. When a bookkeeper and a CPA are both involved, the usual risk isn't a wrong entry. It's an entry made twice, or made in one place and not the other.
What year-end adjustments usually are
- The year's depreciation
- Loan payments split into principal and interest
- Personal charges moved to owner withdrawals
- Assets bought during the year that were recorded as expenses
- On accrual books, unpaid bills and customer invoices at year-end
- Corrections that the year-end reconciliation turned up
The order I use
- I propose. Each adjustment comes in writing, with the accounts, the amount, the date and a one-line reason.
- You approve. They're your books; nothing changes without your approval.
- Your bookkeeper records it. One person changes the ledger, so each entry is made once.
- I confirm. Before I finish the return, I check that each approved adjustment reached the final ledger and that the trial balance matches the return.
Why the books should carry the adjustments
If adjustments live only in the tax return, next year's books start from the wrong opening balances, and the same differences come back. Recording them in the books keeps the books and the return in agreement.
Keep a log
An adjustment log answers most later questions. For each entry it records the date, the entry, the reason, who approved it and when it was recorded. Keep it with the year's records.
When the list gets long
A long list of adjustments usually means the books need a cleanup before the return. That is a separate bookkeeping cleanup scope. See also working with your existing bookkeeper.
What happens next
Use the contact form through the contact form. Don't send records there.
