Year-end closing checklist for a small business (2026)

What closing the year means

Closing the year is the monthly close done once more, with more care and a few extra steps. At the end you want three things: every account agrees with an outside record, the profit for the year is final, and nobody can change it by accident afterwards.

Most of this list assumes a December 31 year-end. If your fiscal year ends in another month, the steps are the same; only the form dates move.

Before December 31

A few jobs are easier, or only possible, while the year is still open.

1. Send the last invoices of the year. On the accrual basis, work done in December belongs in 2026 even if you invoice it in January. Bill it now or record it as accrued income.
2. Chase overdue invoices. Go through the A/R ageing report. Customers often pay before the holidays if you ask. See how to collect overdue invoices.
3. Decide on write-offs. An invoice you will never collect should be written off in the year it went bad, with the evidence kept. See how to write off a bad debt.
4. Count the stock. If you carry inventory, plan a physical count as close to December 31 as you can. The IRS expects a physical inventory at reasonable intervals with the books adjusted to it; the CRA expects inventory valued consistently from year to year.
5. Collect the missing paperwork. W-9s from US contractors, and receipts for any card charge or cash payment you have not yet recorded.
6. Talk to your accountant about timing. Buying equipment before or after December 31, paying a bonus, or prepaying an expense can change the year's tax. Decide while you still can.

Reconcile everything

Once the December statements arrive, every balance sheet account should agree with something outside your books.

An account you cannot reconcile is the one to fix before anything else. A small unexplained difference in December is often a large problem by March.

Adjusting entries

These entries put income and expenses in the right year. Your accountant may make some of them, but you should know what they are.

• Depreciation on equipment, vehicles and furniture. Book depreciation and tax depreciation (MACRS or Section 179 in the US, capital cost allowance in Canada) are often different numbers; see fixed assets and depreciation basics.
• Accrued expenses: wages earned in December but paid in January, interest owing, a utility bill for December that arrives later.
• Prepaid expenses: insurance or software paid in 2026 that covers months of 2027.
• Deferred income: customer deposits and retainers for work not done yet stay a liability. See customer deposits and retainers.
• Inventory adjustment to the physical count, with the difference going to cost of goods sold.
• Owner's draws and contributions checked and classified, not left in expenses. See owner draws vs contributions.

Then run the trial balance, the profit and loss and the balance sheet, and read them line by line against last year. Anything that moved a lot deserves a reason. Comparing the year with your budget helps here too; see budget vs actual reports.

Year-end forms and dates

The books feed several filings due early in 2027. In the US:

• Fourth 2026 estimated tax payment for owners who pay estimated tax: Friday, January 15, 2027. See the Q4 estimated payment.
• W-2s, 1099-NEC, Form 941 for Q4 and Form 940: Monday, February 1, 2027, because January 31 is a Sunday. See W-2 and 1099 deadlines and handling 1099 vendors.

In Canada:

• December source deductions for regular remitters: Friday, January 15, 2027. See CRA remittance schedules.
• T4 and T4A slips and summaries: Monday, March 1, 2027, because February 28 is a Sunday. See T4 and T4A slips for 2026.
• GST/HST: annual filers with a December year-end file within three months, and individuals with business income pay by April 30 and file by June 15, 2027. See the GST/HST filing guide.

For payroll specifically, the payroll year-end checklist covers the December checks before the slips go out. Every other date is in the 2027 US tax calendar and the 2027 Canadian tax calendar.

Close and lock the year

1. Give your accountant the file or the reports. Trial balance, general ledger, balance sheet, profit and loss, the ageing reports and the reconciliations are the usual package.
2. Enter their adjustments as journal entries dated December 31, so your books match the tax return.
3. Close the year. The closing entry moves the year's net income into retained earnings (or owner's equity), so 2027 starts at zero for income and expenses.
4. Lock it. Set a closing date so nobody can add, change or delete a 2026 transaction without a password.
5. Make a backup of the closed year and keep it somewhere other than the office PC. See how to back up your accounting data. Keep records for at least as long as the tax authority can ask for them: the CRA generally requires six years from the end of the tax year they relate to.

In AcboBooks

AcboBooks has a Year-End Close screen that posts the closing entry to Retained Earnings and can be reversed if your accountant sends a late adjustment. The closing date and an optional closing password are in Company Settings, and the audit trail shows any change made to a closed period. Check Data looks for problems in the file, the Adjusting Journal Entries and Adjusted Trial Balance reports show what changed at year-end, and an accountant can be given read-only or standard access with an invite code. What it does not do: it has no separate tax-depreciation schedule (book depreciation only) and does not prepare income tax returns. It is a Windows program bought once for $399.99; the features page has the full list.