All business owners know the importance of reconciling their checking and savings accounts. And most pay close attention to the Profit & Loss Statement at year end because, of course, it determines what your tax liability will be.
But did you know that the most important financial statement by far is your company's BALANCE SHEET?
- Your Balance Sheet provides a snapshot of the business's assets, liabilities, and owners' equity. It helps determine your company's solvency and for that reason, is the financial statement most relied upon by banker and investors.
- The IRS requires full disclosure of the Balance Sheet, in addition to the Profit & Loss Statement, and requires your tax preparer to disclose your prior year's Balance Sheet reconciliation.
If your Balance Sheet reconcilation isn't accurate, you could end up paying additional fees to your tax preparer to amend your corporate return as well as personal tax returns. Costly mistakes in a reconciliation can occur if you or your accounting department performs any of the following after your tax return is prepared.
- Void checks from prior years
- Record deposits or payments to a prior year
- Misclassfied loans or prepaid expenses
- Make adjustments to Retained Earnings
Our proactive recommendation is to have your corporate books reviewed by your accounting firm in October or November to address any problems. This will make the tax preparation process go smoothly and save you from paying extra fees to your accounting firm.