Month-end accounting procedures are done to ensure that mistakes are caught and corrected and to provide an accurate picture of your business's finances. Whether your company uses a computerized or manual accounting system, the basic procedures are the same. Follow a regular, documented routine each month so you don't forget anything and to demonstrate to the company's auditors that you've followed correct accounting procedures.
Print or extract the trial balance and examine it for any obvious errors. Check each account in the general ledger and correct any transactions that have been posted to the wrong account by making annotated journal entries. Complete any outstanding payroll entries, such as deductions from salary.
Post month-end adjustments for depreciation, prepayments and accruals. Write off any debts that cannot be collected and calculate and post the allowance for bad debts.
Reconcile the company's bank accounts to the cash book. Post transactions from the bank statement that do not appear in the general ledger bank account, such as bank interest and charges and loan payments. Reconcile the bank statement to the cash book for outstanding deposits or unpresented checks.
Post any transactions from credit card statements that have not been entered in the ledgers and check that the outstanding amounts due agree with the balance for each card in the accounts payable ledger.
Count the amount in the petty cash box and reconcile it with the balance on the petty cash account. Post any outstanding entries from the petty cash book to the general ledger.
Reconcile accounts receivable and accounts payable by listing individual balances and checking that they agree with the balances on the debtor and creditor accounts.
Print out or extract a new trial balance report, check it and make any further adjustments needed.
Complete the month-end procedures by closing all income statement accounts to the income summary account and carrying the balances forward to the new month. Post the balance on the income summary account to the owner's capital account -- or to the retained earnings account for a corporation. Finally, print out or produce the monthly financial statements.
Isobel Phillips has been writing technical documentation, marketing and educational resources since 1980. She also writes on personal development for the website UnleashYourGrowth. Phillips is a qualified accountant, has lectured in accounting, math, English and information technology and holds a Bachelor of Arts honors degree in English from the University of Leeds.