Corporate Income Tax Returns

Once the financial statements have been prepared, the corporate income tax returns need to be prepared for all levels of government that require them.

Your accountant will take the income figures from the financial statements he or she has just prepared and will adjust them for any necessary differences between book and tax. For example, a portion of the meals and entertainment expense must be added back into income for tax purposes, as it is not 100 percent deductible.

Once the balances for income taxes owing are calculated, the accountant must make an entry in the financial statements to accrue this liability. Then, both the financials and the tax returns are finalized and presented to you for signing.

Rolling Forward the Year

The process of close off and roll forward simply clears out your income statement accounts so that you can start fresh for the new year. Your balance sheet accounts carry forward, but the income and expense accounts roll up into retained earnings.

If you are on a manual system, your closing entry will debit your revenue accounts and credit your expense accounts to bring them to zero. The difference is debited or credited (as the case may be) to retained earnings.

If you are on a computerized system, there will be a close-off procedure to perform as well. It's very important, however, to save a backup copy of the final figures from the prior year. Keep this backup separate from your daily backups so that you know that it is the final one. Once you have done that, and you have read the system documentation for the roll-forward procedure, you can perform that task.

Now you are ready to start your new year!