About Monthly Closing

The process referred to as the Monthly Closing relates to the "cutoff" of transactions for a defined period in order to create financial statements for that period. This process of "cutoff" allows organizations to clearly identify which transactions took place in which periods and to measure the financial impact on the organization in terms of profit and losses or changes in assets and liability balances. The summary below describes key activities that take place during a "Monthly Close":

• Transactions are updated from all sub ledgers to the General Ledger.
• Sub ledger balances (such as Receivables, Payables, Inventory, and Sales) are agreed to General Ledger balances. This means the total of the sum of the sub ledger accounts balances with the amount in the General Ledger.
• Direct and recurring Journal entries are recorded in the General Ledger for corrections and adjustments. These include regular bank service charges, interest credits, outstanding checks, and so forth.
• Preliminary financial reports are created.
• Analytical review procedures are applied in order to identify any unusual changes in financial statement balances. This involves examining trends in revenue and expense line items to check for any discrepancies between what was recorded and what was expected.
• Financial statements are created for reporting purposes.