What This Means for You, Business Owner: Most tax‑driven adjusting entries don’t happen in January — they happen when the tax return is prepared. January isn’t about reviewing this year’s adjustments yet. It’s about learning from last year’s adjustments so you don’t repeat the same issues.
When adjusting entries are added during tax prep, many business owners mentally check out.
They either:
- Scroll past them
- Assume they’re “tax stuff” and move on
That reaction is common — but January is actually when reflection and planning matter most.
This post is part of our December–February 3‑month series, where January is about accuracy, understanding, and closing the loop — not just finishing tasks.
At this stage in January, new tax adjusting entries usually haven’t been made yet.
The real question is whether you reviewed last year’s adjusting entries and learned from them.
Last year’s adjusting entries often reveal:
When you review prior‑year adjusting entries, you learn:
- Which numbers changed — and why
- Whether changes were tax‑driven or process‑driven
- What could be handled differently going forward
When prior‑year adjusting entries are ignored:
- Owners don’t know what changed in their final numbers
- CPAs make assumptions without owner context
- Patterns repeat year after year
- The same problems show up again in the next tax cycle
- You lose the chance to improve accuracy during the year
Adjusting entries aren’t criticism. They’re feedback.
And feedback is how systems get better.
Key takeaway:
Adjusting entries only add value when they’re reviewed, understood, and used to improve how the business operates going forward.
Your action item:
Pull last year’s adjusting entries and review them with your bookkeeper (and CPA if appropriate).
Ask:
- What changed during tax prep?
- Why was this adjustment needed?
- Is this tax‑specific, or does it point to a bookkeeping process gap?
- What can we change this year so this adjustment isn’t needed again?
No bookkeeper yet? If you only see your books once a year, adjusting entries can feel mysterious. Having year‑round support makes those changes understandable — and actionable.
