You Never Had Real Books in the First Place

The business started small and the record keeping never caught up with it. Returns were prepared each year from a list of totals, bank statements, or whatever the software export showed. There has never been a balance sheet, and nobody has reconciled an account.

It works until someone asks a question the totals cannot answer. A lender wants financial statements. A buyer wants three years of history. The business takes on a partner, elects S corporation status, or gets a letter asking how a number on the return was arrived at.

We start from the last filed return, because its figures are what the books have to agree with on day one. From there the period is rebuilt from bank and card statements, account by account, and reconciled monthly.

How far back to go depends on what the books are needed for. For a lender or a buyer it is usually several complete years. For ongoing tax work, it may be only the current year plus opening balances taken from the last return. We tell you which applies before quoting.

Your spreadsheet is still useful. It often holds the one thing statements do not: what you thought each payment was for at the time. We use it as a guide to categories and check it against the bank.