How to Get Your Small Business Tax Ready | Balance Sheet
In our last segment we discussed correctly reporting your business assets. The sixth step in getting your small business tax ready is making sure your balance sheet is correct.
The balance sheet is a valuable tool in the course of running your business. The balance sheet shows dollar values for what you own, what you owe and what is left over for you personally. For these accounts you can find one or two pieces of paper that prove the numbers are accurate.
- Proof that all sales and cost of goods are recorded and accurate
- Cash and bank accounts: If you don’t reconcile with your bank statement, you need to start! Reconciling with your bank at year-end shows that all items on the bank statement are accounted for in your bookwork.
- Accounts receivable: This is money due to you from clients or customers. This shows that all sales are recorded in your paperwork.
- Inventory: If you sell product here is where you show total of anything on your shelves for sale
- Fixed assets: These are the depreciable items. Some examples of fixes assets are equipment, furniture, building, and vehicles.
- Proof that all purchases and expenses are recorded and accurate
- Accounts payable: The amount owed to your creditors
- Sales tax and payroll taxes collected and owed to the government agencies (January reports prove these amounts)
- Business notes and loans payable, lines of credit, business credit card balances :
- Credit card receipts from January through December should be recorded in expenses on date purchased and recorded in a credit card payable account. When payments to the credit card are made they are recorded in the credit card payable account. The balance in this account should be equal to what the credit card statement says at year end.
- Notes and loans should also be reviewed at year to prove that the balances equal balances per bank, showing that interest expense was recorded properly.
Balance sheets items take one or two pieces of backup paper to prove their accuracy. If your assets and liabilities are correct, chances are so are your income and expense.