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Truth and Reconciliation

DECEMBER BOOKKEEPING FOCUS:Wrap Up the Year and Start Fresh in January

by | Dec 4, 2025 | Bookkeeping | 0 comments

Welcome back to our Monthly Financial Maintenance Series, where we help Canadian business owners stay financially organized month by month.

With December upon us, the focus shifts to finalizing your books, tying up loose ends, and preparing for tax season. Completing these final year-end tasks now means you can start the new year fresh – without scrambling through receipts or reconciling transactions at the last minute.

Here’s your December bookkeeping checklist to help you close out the year with clarity and confidence.

  1. Finalize All Bank and Credit Card Reconciliations

Make sure every account is fully reconciled through the end of December.

  • Review November and December statements carefully.
  • Record any outstanding cheques, deposits, or bank fees.
  • Confirm that all transactions have been matched in your bookkeeping software.

Your final reconciliations form the foundation for accurate year-end reporting.

  1. Confirm All Invoices and Payments Are Recorded

Ensure your income and expenses reflect the full calendar or fiscal year.

  • Issue any final customer invoices before December 31.
  • Record late or pending vendor bills.
  • Enter all December expenses, even if they’re paid in January (if using accrual accounting).

This guarantees your year-end financial statements truly represent your business’s performance for the year.

  1. Process Final Payroll and Source Deductions

Before the holidays, wrap up your final payroll runs.

  • Record year-end bonuses, commissions, and benefits.
  • Verify CPP, EI, and income tax remittances are accurate and up to date.
  • Check that your payroll software or provider is set up to generate T4 and T4A slips for February.

Completing this step ensures no last-minute corrections are needed when filing with the CRA.

  1. Verify and Adjust Your Inventory

For businesses that hold inventory, a year-end count is essential.

  • Conduct a full physical inventory before closing on December 31.
  • Record any shrinkage, damage, or obsolete stock.
  • Adjust your inventory balance in your accounting system.

This helps you report accurate cost of goods sold (COGS) and keeps your balance sheet precise.

5.Review Fixed Assets and Depreciation

 

Take a final look at your capital assets before year-end.

  • Record any new equipment, vehicles, or computers purchased in 2025.
  • Remove sold or disposed assets from your books.
  • Apply the correct depreciation entries for the year.

Accurate asset tracking not only keeps your financial statements clean but also ensures you claim the right capital cost allowance (CCA) deductions at tax time.

  1. Review Financial Statements and Reports

Before officially “closing the books,” review your core financial reports:

  • Income Statement (Profit & Loss): Does it reflect your true revenue and expenses?
  • Balance Sheet: Are assets, liabilities, and owner’s equity correct?
  • Cash Flow Statement: Does your cash flow align with expectations?

This is a good time to identify trends, assess profitability, and spot areas for improvement in the coming year.

  1. Make Year-End Adjusting Entries

Your bookkeeper or accountant may need to record adjustments for:

  • Accrued income and expenses
  • Prepaid expenses (e.g., insurance, subscriptions)
  • Depreciation or amortization
  • Inventory adjustments
  • Loan interest accruals

These entries ensure your financials align with Generally Accepted Accounting Principles (GAAP) and CRA reporting standards.

  1. Prepare for Tax Season

Don’t wait until February to think about taxes.

  • Organize all tax-related documents (T4s, T5s, GST/HST filings, etc.).
  • Ensure GST/HST returns are filed for the final reporting period of the year.
  • Review deductible expenses and confirm nothing has been missed.

If you’re incorporated, check that your corporate year-end filing deadlines and fiscal period align with CRA requirements.

  1. Back Up and Archive Your Financial Data

Year-end is the perfect time to safeguard your data.

  • Back up your accounting files to the cloud or an encrypted device.
  • Store digital copies of receipts, invoices, and reports.
  • Keep all financial records for at least six years, as required by the CRA.

Proper data storage keeps you compliant and protects against future audits.

  1. Reflect, Celebrate, and Plan Ahead

Before jumping into January, take time to review the bigger picture.

  • Compare this year’s performance to last year’s goals.
  • Celebrate milestones and growth.
  • Set realistic financial objectives and budgets for the year ahead.

Taking a moment to recognize your accomplishments gives valuable perspective—and motivation to build on your success.

Close Out the Year with Confidence

A thorough December close ensures your business starts January strong. By finalizing reconciliations, payroll, and financial reports now, you’ll have clean books, accurate data, and a clear financial outlook for 2026.

At TNI Business Services, we specialize in year-end bookkeeping, payroll management, and tax preparation support for Canadian businesses. Let us handle the details so you can focus on planning – and celebrating – the year ahead.

Next in the Series

Join us in January for our New Year Bookkeeping Focus, where we’ll share smart strategies to set up your 2026 books, refresh your budget, and kick off the new year on the right financial foot.

Pro Tip: Plan Ahead for a Stress-Free Tax Season

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