The month-end close checklist

A month is closed when the books can be relied on without further adjustment for that month. A disciplined close takes a few days. A year-end that starts from twelve months of open items takes weeks. The checklist below is the order in which the work is usually done.

Before closing: transactions

1. Record all sales invoices, credit notes, and receipts dated up to the last day of the month.
2. Record all purchase invoices and expense claims received, including those dated in the month that arrived late.
3. Book goods received but not yet invoiced, and services received but not yet billed.
4. Record bank charges, interest, and any direct debits that appear on the statement.

Reconciliations

1. Reconcile every bank account to the statement, with each unreconciled item listed and dated.
2. Agree the debtors’ and creditors’ control accounts to their subsidiary lists.
3. Reconcile loan balances to lender statements.
4. Reconcile cash on hand to a count, and clear petty cash balances.
5. Agree inventory in the books to stock records and to the latest count.

Adjustments

1. Accrue expenses that belong to the month and have not been billed, such as rent, utilities, and professional fees.
2. Defer prepaid expenses and advances received that belong to later months.
3. Post depreciation from the asset register.
4. Post the payroll journal and agree salary payable, provident fund, and other deductions to the payments made or due.
5. Provide for known doubtful balances and claims where the policy requires it.
6. Review foreign-currency balances and revalue them as the policy requires.

Statutory and tax entries

1. Agree the GST on sales and purchases in the ledger to the returns for the month. See the reconciliation checklist.
2. Agree tax deducted at source on payments made to the amounts that will be deposited and returned.
3. Record the provision for income tax if the policy is to do so monthly or quarterly.
4. Note the due dates for the next month and who is responsible for each.

Review and lock

1. Check that the trial balance agrees and that suspense accounts are zero or explained.
2. Compare each line of the profit and loss account with the previous month and the budget. Ask about any movement that cannot be explained.
3. Have someone other than the preparer review the reconciliations and the journal entries.
4. Lock the period in the accounting software so later entries are visible as adjustments, not silent changes.
5. Release the management report, with a short note on open items.

Companies must use accounting software that keeps an audit trail of changes. Locking a period helps keep that trail clean. See the note on books of account.

Records to keep ready

• Bank statements and reconciliation statements
• Control account and subledger listings
• Journal vouchers with supporting calculations
• The signed-off close checklist for the month