Why Does My CPA Make Journal Entries Every Year?
Year-End Adjustments Are Normal. Repeating the Same Ones Every Year May Not Be.
Many business owners notice that every tax season their CPA prepares a list of journal entries before the tax return can be completed.
Depreciation is adjusted.
Loan balances change.
Payroll liabilities are corrected.
Owner distributions are reclassified.
Retained earnings moves.
Eventually many owners ask the same question:
“If my bookkeeping is correct, why does my CPA keep changing my books?”
The answer depends on the nature of the adjustments.
Some year-end journal entries are a completely normal part of the accounting process.
Others may indicate weaknesses in the bookkeeping system that continue year after year.
Understanding the difference is important because recurring accounting corrections often signal opportunities to improve the quality of your financial reporting.
Quick Answer
Most CPAs prepare certain year-end journal entries as part of normal tax and financial reporting. However, if the same significant adjustments occur every year—such as correcting payroll, loan balances, owner equity, or reconciliations—it may indicate that the accounting process needs improvement rather than simply another year-end adjustment.
Journal Entries That Are Completely Normal
Many adjustments are expected during the normal accounting cycle.
Examples include:
- Depreciation expense.
- Amortization.
- Interest accruals.
- Income tax adjustments.
- Year-end accruals.
- Inventory adjustments.
- Closing entries.
These adjustments are often necessary because they require year-end information that is unavailable throughout the year.
They do not necessarily indicate poor bookkeeping.
Adjustments That May Signal Accounting Problems
| Recurring Adjustment | Possible Cause |
|---|---|
| Cash corrections | Incomplete reconciliations. |
| Loan balance adjustments | Principal payments posted incorrectly. |
| Payroll liability corrections | Payroll entries not reconciled. |
| Owner equity reclassifications | Distributions recorded inconsistently. |
| Large suspense account adjustments | Transactions classified incorrectly. |
| Opening Balance Equity adjustments | Historical setup issues remain unresolved. |
When similar corrections appear every year, it may be more efficient to address the underlying accounting process instead of repeating the same adjustments indefinitely.
Why This Matters
If major journal entries are made only after year-end, your monthly financial statements may not accurately reflect the financial condition of your business throughout the year.
That can affect:
- Cash flow decisions.
- Business planning.
- Loan applications.
- Owner distributions.
- Budgeting.
- Financial reporting.
Improving the accounting process during the year often produces more reliable financial statements every month—not just after tax season.
How Controller Review Helps
Our Controller Review Services focus on identifying recurring accounting issues before year-end.
Instead of waiting for tax season, we evaluate the accounting throughout the year to help reduce avoidable correcting entries, strengthen month-end procedures, and improve the quality of your financial reporting.
The goal is not to eliminate legitimate year-end entries.
The goal is to eliminate unnecessary surprises.
Frequently Asked Questions
Should my CPA make journal entries every year?
Yes. Certain adjusting entries are a routine part of year-end accounting and tax preparation. The key question is whether the adjustments are expected or whether they correct recurring bookkeeping issues.
Does this mean my bookkeeper is doing something wrong?
Not necessarily. Many recurring adjustments result from evolving businesses, software limitations, timing differences, or historical accounting practices. A professional review can help determine whether process improvements are appropriate.
Can recurring journal entries be reduced?
Often, yes. Better month-end procedures, regular reconciliations, and periodic Controller Review can reduce many recurring accounting corrections while improving the reliability of financial reporting.
Should I ask my CPA why they made each adjustment?
Absolutely. Understanding significant journal entries helps business owners better understand their financial statements and identify opportunities to strengthen the accounting process.
Year-End Adjustments Should Add Value—Not Create Annual Surprises
Professional year-end journal entries are an important part of the accounting process.
However, if the same major corrections occur every year, it may be time to evaluate the accounting system itself.
Our Accounting Diagnostic™ helps identify recurring accounting issues, while our Controller Review Services help improve financial reporting throughout the year so your books work for you—not just your tax return.