The year-end closing process involves reviewing, reconciling, and verifying that all your financial transactions and every aspect of the company's ledgers from the past fiscal year add up. This includes calculating your business expenses, income and revenue, investments and assets, equity, and so forth.
There are eight core steps to closing the books (these apply equally to end-of-month or year!
- Identifying transactions
- Recording transactions in a journal
- Posting to the general ledger
- Preparing an unadjusted trial balance
- Reconciling debits and credit
- Creating adjusting journal entries
- Running an adjusted trial balance and financial statements
- And finally, closing the books to reset your income statement accounts to zero and lock in balance sheet accounts