Month end closing

Month end closing
See also

Month end closing procedures "are necessary for purposes of reconciling the bank statement, accounts receivable and accounts payables and for making timely business decisions based on current operating results. The purpose of this policy is to ensure month-end closing procedures are performed in a timely manner" (B.A. Warn, E.W. Woodcock 2001, s. 321).

Month end closing procedures

The procedures for month end closing are as follows (B.A. Warn, E.W. Woodcock 2001, s. 321):

  1. All paid documents with the fee entered for the last business day of the month must be sent to the Central Billing office on the first business day of the following month. A daily check should be carried out and to make sure that all paid documents have been settled, an agreement should be made between the planning system and the charges made;
  2. Upon receipt, these payment tickets must be entered into the billing system;
  3. All documents, invoices and receipts from the last day of the month must also be forwarded to the CBO (Central Billing Office) for posting;
  4. Documents for the last day of the month must also be sent as soon as confirmation of the booking is received from the bank, which usually occurs 1-2 days after the date of payment;
  5. After posting all payments and receipts for the month must apply the interface between the billing system and the general ledger. "This usually happens the night of the second business day of the following month";
  6. "During the first two business days, all journal entries should be prepared and entered. The interface between the accounts payable and general ledger systems should also occur. It is essential to have all accounts payable bills for the month entered into the system by the second business day. For utility bills (and similar bills) that do not come until later in the month, a permanent accrual (based on average monthly expense) can be made with a "true-up" of the previous month's actual expense";
  7. On the third business day of the following month, you can pre-check that entries made in the general ledger are made correctly and that there have been no mistakes regarding the sums of transactions made;
  8. Any subsequent entries, corrections, and other annotations resulting from errors or inconveniences found during the review of the general ledger should be entered quickly enough to be able to run the final trial balance on the fourth business day of the month;
  9. After checking the correctness of all entries and annotations made in the general ledger by the controller, you can create all necessary reports and spreadsheets on their basis, and then submit them for distribution;
  10. "The week subsequent to the issuance of financial statements, a reconciliation of each balance sheet account should be performed. Any journal entries required as a result of this reconciliation process should be prepared for the following month. The balance sheet reconciliations will be reviewed and signed off by the Controller once they are completed".

Year end closing

Based on month end closing, the year end closing is created. The procedure for creating year end closing is very similar to the one used for creating moth end closing, but there is one difference - the commitments will be open for two weeks after the end of the year to ensure that all bills for the year have been closed (B.A. Warn, E.W. Woodcock 2001, s. 322).

References

Author: Patrycja Czerwiec