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MONTHLY CLOSING AND RECORDS REVIEW

Every business can benefit from having a regular monthly closeout of the company’s accounting because having accurate, up-to-date financial reports helps executive management with forecasting, and improves decision making.

The closeout process consists of reconciling significant balance sheet and income statement accounts including but not limited to

1

CASH ACCOUNTS RECEIVABLE

2

FIXED ASSETS

3

ACCOUNTS PAYABLE

4

CREDIT CARDS DEBT

5

PAYROLL

THE MONTHLY CLOSE PROCESS ALSO INCLUDES THE PREPARATION AND ANALYSIS OF THE WORK-IN-PROGRESS SCHEDULE.

STEP-BY-STEP PROCEDURES FOR THE MONTHLY CLOSEOUT

STEP 1

To reconcile cash, each deposit and withdrawal item from the monthly bank statement is reconciled to the accounting system to ensure all transactions were recorded and agree to the bank. It is also important to analyze any outstanding checks or deposits that did not clear the bank in a timely manner to ensure the transactions are recorded properly and received by the payee.

STEP 2

The accounts receivables balance should be reviewed by making sure all invoices have been posted for the current period and making sure all payments received have been applied properly. Additionally, it is important to review the accounts receivable aging report for items that have potential collectability issues, which are typically invoices that are older than 60-90 days past due depending on your typical payment cycle of your customers.

STEP 3

Fixed assets accounts need to be reviewed to record any fixed asset additions or disposals for the period and to record the necessary depreciation adjustments. The Income Statement should also be reviewed for large expense items that may have inadvertently been expensed that should be capitalized.

STEP 4

To calculate the accounts payable, first, a cut off day is chosen (which is usually after the first week of the month). Next, vendor invoices that come in before the cut off day are posted to the general ledger. Any invoices coming in after the cut off day are posted on the following month. Any other vendor liabilities that are not invoiced but are known to the company are accrued at the monthly close with an adjustment to the accounts payable account. It is important to review monthly vendor and subcontractor statements to make sure all invoices are in the accounting system and properly job costed. A review of the accounts payable aging report should be done for credits that can be taken and review of any old unpaid invoices.

STEP 5

The monthly credit cards statements are reconciled to the general ledger making sure transactions are posted to correct expense accounts and job costed as necessary.

STEP 6

For other debt accounts, such as loans, notes payable, and credit lines, the balances should agree to the loan amortization schedules and lender statements ensuring the principal and interest payments have been applied properly.

STEP 7

The payroll accounting entries are verified to make sure each employee’s time is allocated to the correct job or expense account. All payroll liabilities are reviewed to make sure any required withholdings are paid to the employee tax authorities on time.