Posting the Adjusting Journal Entries

Now that you have the financials and tax returns back from your accountant, it is time to start closing off the year. The first step in this process is to post the accountant's adjusting entries to your bookkeeping system. This action keeps your records in step with the final financial statements.

The accountant will have given you a listing of the journal entries he or she had to make as a result of the preparation of the statements. You will post them to your journal as of the last day of the year. Be careful to post them to the appropriate year. If you are on a manual system, just leave enough room in the old journal to post the entries. You will have to wait until you get the entries back from the accountant before you record the new year's opening balances; otherwise, some will be incorrect.

If you are on a computerized system, you will need to have a good understanding of how the program handles posting to the new year. In the current versions of most software, you are allowed to continue your day-to-day posting in the new year without closing off the old year. If your software does not have that capability, you will have to hold off on any bookkeeping for the new year until you have posted the adjusting entries for the old year and have rolled forward. This situation could leave you with a backlog of a month or two of bookkeeping. It's especially impractical if you use your bookkeeping system to print invoices and checks.

Once the entries have been posted, print off a balance sheet and income statement for the prior year. Double check that you have the same figures in your journals as are in the final financial statements, especially the retained earnings. If you roll the year forward and there are discrepancies, they will be a hassle to fix.

When all the balances match, it's time to close off the year and roll forward.