CHAPTER 7: ACCOUNTING, RECORDS, AND ASSOCIATED REGULATIONS
7.5 Month-End Close
The month-end close process for a company is an important requirement for ensuring accurate and timely financial statements. Key processes include account reconciliations, review of management reports, and analysis of budget versus actual financial results. Best practice requires all departments to create a month-end process to close off accounts and processes integral to reporting the company’s operational and financial results. For accurate closing, the following steps must be performed: All sales orders have been entered into the system; All orders shipped have been invoiced;
All payments and deductions received have been entered; Or otherwise, create a journal entry known as an accrual.
Internal controls should be developed and implemented as part of the month-end close to ensure that the financial results are free of material misstatements.
The month-end close process must document the procedures performed to close off the processes or accounts at the end of the fiscal period, including the cut-off procedures.
Month-end close prepares and ensures that the year-end closing process is completed accurately and in a shortened timeframe. Closing should not disrupt the day-to-day business but be an ongoing part of the process. The more automated the functions are, the easier closing the books becomes. MONTH-END CLOSE CHECKLIST A month-end checklist may be used to document the month-end close tasks or procedures necessary to close out the accounts receivable system. The checklist should include some additional procedures if the fiscal period closing process is for the end of a quarter or the end of the year. All significant procedures should be documented, initialed, and dated upon completion by the designated responsible team member. A checklist should include the following information: Procedure/task to accomplish for month-end closing; Person or department responsible for performing the procedure or task; Recording the date of completion; and Documenting any comments that may be necessary to clarify the procedure or task. Some examples of procedures or tasks to include on the checklist: Cut off invoice processing at noon on the AR system on the last day of the month. Prepare a general ledger journal entry for accrued billing and forward to the general accounting department.
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THE ACCOUNTS RECEIVABLE SPECIALIST CERTIFICATION PROGRAM E-TEXTBOOK
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