Month-end closing is essential for businesses, ensuring precise financial reporting and supporting decision-making. At DistantDuo Outsourcing, we understand the importance of a smooth month-end close to improve financial organization, reduce errors, and enhance accuracy. Here’s a comprehensive checklist for accountants covering critical month-end tasks, from reconciliation to financial reporting.
1. Cash and Cash Equivalents
Bank and Credit Card Reconciliation: Match bank statements with ledger balances to ensure cash accuracy. This includes resolving discrepancies promptly to prevent misstatements. (Reference: US GAAP ASC 305; IAS 7)
Petty Cash Management: Reconcile petty cash to ensure it aligns with actual balances and investigate variances.
Record Transfers: Accurately log internal transfers to reflect true cash flow.
2. Accounts Receivable (AR)
AR Ledger Review: Ensure the AR ledger aligns with issued invoices and payments received.
All Customer Billing: Verify that all customers are billed for services rendered within the month, including services previously accrued that now need invoicing or recurring contractual bills. Examples include:
Monthly Hourly Support: Bill clients based on hours logged for monthly support.
Contractual Rent Invoices: Issue invoices for long-term lease agreements.
Subscription or Retainer Fees: Generate invoices for monthly, quarterly, or annual subscriptions.
Aging Report Analysis: Identify overdue accounts, prioritize collections, and adjust bad debt reserves. (Reference: US GAAP ASC 310; IFRS 9)
Customer Payment Verification: Ensure all payments are applied correctly, reducing outstanding balances.
3. Accounts Payable (AP)
AP Ledger Check: Confirm the AP ledger reflects all vendor invoices accurately.
Outstanding Invoices Review: Match approved vendor invoices with purchase orders, verifying completeness.
Credit Card Balances: Record any credit card balances as short-term liabilities and accrue interest as applicable. (Reference: US GAAP ASC 835; IAS 23)
Expense Accruals: Recognize expenses incurred but not yet billed. (Reference: US GAAP ASC 450; IAS 37)
4. Revenue Recognition
Revenue Check: Confirm revenue is recognized in the correct period and complies with applicable standards. (Reference: US GAAP ASC 606; IFRS 15)
Income Ledger Reconciliation: Ensure all income sources are recorded accurately.
Deferred Revenue Adjustments: Identify and defer revenue for services not yet rendered, ensuring accurate recognition.
5. Fixed Assets
Asset Register Update: Document new acquisitions, disposals, or write-offs in the asset register. (Reference: US GAAP ASC 360; IAS 16)
Depreciation Calculation: Calculate and post monthly depreciation based on the asset’s useful life.
Maintenance vs. Capital Expenses: Classify expenses as either capital expenditures or regular maintenance for accurate reporting.
6. Loans and Liabilities
Loan Reconciliation: Verify loan balances and ensure accurate separation between principal and interest. (Reference: US GAAP ASC 470; IFRS 9)
Interest Expense Posting: Record any accrued interest not yet paid.
Covenant Compliance Check: Review loan agreements for covenant compliance and timely adherence.
7. Expense Management
Expense Ledger Review: Confirm all expenses align with receipts and invoices.
Variance Analysis: Compare expenses against budgeted amounts and investigate discrepancies.
Month-End Expense Accruals: Recognize expenses incurred but not yet billed. (Reference: US GAAP ASC 450; IAS 37)
8. Prepaid Expenses
Prepaid Ledger Reconciliation: Verify that prepaid balances reflect the true prepayment amounts.
Monthly Amortization: Allocate prepayments such as rent or insurance appropriately. (Reference: US GAAP ASC 720; IAS 38)
Adjustment for Expired Prepaids: Write off fully utilized prepayments.
9. Payroll Reconciliation
Payroll Ledger Check: Reconcile payroll disbursements to recorded entries. (Reference: US GAAP ASC 710; IAS 19)
Payroll Tax and Deductions Review: Verify payroll tax remittances and deductions are accurate.
Wage Accruals: Recognize wages earned but unpaid as month-end liabilities.
10. Inventory Management
Inventory Ledger Reconciliation: Ensure inventory counts align with ledger balances. (Reference: US GAAP ASC 330; IAS 2)
Monthly Inventory Counts: Adjust for discrepancies between book and physical counts.
Write-Down of Obsolete Stock: Remove damaged or outdated inventory from the balance sheet.
Financial Reporting and Analysis
Cash Flow Statement: Prepare a cash flow statement summarizing cash inflows and outflows for the period. (Reference: US GAAP ASC 230; IAS 7)
Aging Reports: Generate AR and AP aging reports for tracking overdue receivables and prioritizing payables.
Revenue and Expense Analysis: Compare revenue and expenses against the budget to identify trends and variances.
Financial Statements Compilation: Draft accurate financial statements, including the income statement, balance sheet, and cash flow statement, with all adjustments. (Reference: US GAAP ASC 205; IAS 1)
Conclusion
A structured month-end close improves financial transparency, aids compliance, and informs strategic decisions. Following a detailed checklist ensures accountants deliver timely, accurate financial reports. For businesses needing extra support, DistantDuo Outsourcing offers reliable assistance in month-end close processes, from credit card reconciliations to complete financial reporting.
If month-end tasks are overwhelming, contact DistantDuo Outsourcing for professional, efficient month-end close support designed to help your business thrive.
📩 Subscribe for more articles on essential accounting practices!
💬 Comment below to share your thoughts or suggest improvements to this article!
Comments