Step 5 - Verify account balances
So, you have entered all transactions through the current date. Now you should verify that all of the account balances reflect real-world amounts by comparing them to external sources. Reconcile the bank account to your bank statement and do this every month. Verify the credit card liability to your credit card statement. Notes payable compare to a loan history or loan statement from your bank. Accounts payable should be verified to vendor statements, and sending accounts receivable statements to customers will help to verify receivable balances.
Reconciling the balance sheet accounts — assets, liabilities and equity — on a monthly basis will make year-end reconciliations easier and will make assembling information for your tax accountant quick and easy.
Now, after that you are ready to begin using your accounting system. Data entry will be easier-and make more sense. Accounts payable will reflect the correct amounts owed to vendors, and accounts receivable will show correct customer balances. Financial reports will show correct balances for all balance sheet accounts and will reflect the true results of operations. The account balances will also agree with your tax returns for the previous period.
Step 6 - Take a rest
After all this work – take a rest, have a cocktail and relax.