The Monthly Close

1The purpose and status of a close

A monthly close is the process of completing and reviewing accounting records for a month. The close checks whether transactions are recorded in the appropriate period, account balances are supported, and material questions have been resolved or identified. A report exported after month end is not automatically a closed report.

The admin manager prepares the records and checks. The CEO reviews material exceptions and the resulting report. The accountant advises on accounting policies, adjustments, and taxes. The exact responsibilities depend on the company's access permissions and outside accounting arrangement. Agree on the responsibilities before setting a close date.

A close checklist names the work, its supporting evidence, the preparer, the reviewer, and the status. A completed checkbox should mean the evidence was checked, not merely that someone opened a report. Retain the export version and any adjustment explanation used in the review.

Use clear statuses such as records incomplete, prepared for review, reviewed with exceptions, and approved under the agreed process. The status tells the CEO how much confidence to place in a report. A known missing payroll entry can materially change profit, so its status should be visible on the reporting package.

The supplied January-through-September company reports cover completed calendar months. The selected aggregates do not confirm close approval. October 1-6 is partial, and wages are blank. The company bills on the first of the month and payroll synchronizes after the fifth and fifteenth. Check posting completeness without treating those synchronization dates as bank payment dates.

2Completeness and the reporting period

Cutoff means assigning activity to the correct reporting period. In an accrual report, service dates and when costs are incurred matter alongside invoice dates. A supplier invoice received in October may concern licenses used in September. A client invoice prepared early may concern service delivered later.

For revenue, compare the active agreement and approved service period with billing records and accounting invoices. Check new agreements, terminated services, quantity changes, project completions, and credits. Establish whether revenue has been earned under the approved policy. Do not move a charge merely to make the month's result look better.

For costs, inspect supplier bills received after month end, card activity, and service periods. An accrued expense is a cost incurred but not yet paid or fully invoiced. A prepayment is money paid for a benefit used later. The accountant can establish the accrual and prepayment procedures, including whether an adjustment reverses in the following period.

Payroll needs a register showing what the payroll run contains and which work period it covers. The payroll register summarizes earnings, deductions, taxes, and other payroll amounts. Reconcile the register and accounting entries rather than inferring employer costs from a label in a summary P&L.

The company export includes a payroll tax label whose composition needs explanation. A large amount under that label does not establish an employer payroll tax rate. Obtain the register and accountant-approved mapping for employer costs, employee withholding, liabilities, and payments. Employee withholding and employer expense have different accounting roles.

Completeness checks also consider refunds, merchant fees, loan interest, depreciation, and owner transactions. Use a checklist based on actual company activity. If an account has no activity, retain the evidence supporting that conclusion rather than interpreting a blank export as proof of zero.

3Bank and card reconciliations

A reconciliation compares records that should agree and explains their differences. A bank reconciliation compares the accounting cash account with the bank statement. A card reconciliation compares the accounting card account with the card statement. Use the statement's actual ending date and balance.

Outstanding payments are recorded payments that have not cleared the bank at the statement date. Deposits in transit are recorded receipts not yet shown on the bank statement. Such timing differences can be valid. Old outstanding items still need review because they may be duplicates, canceled payments, or records that need correction.

Compare amounts, dates, and identifiers. Look for transactions recorded twice, omitted fees, transfers assigned to expense, and client deposits categorized as new revenue despite existing invoices. Find the cause of a difference before entering a correction. An unexplained adjustment to force agreement removes information needed for the review.

The bank feed imports activity but does not replace reconciliation. Imported activity may include suggested matches that were accepted incorrectly or entries still awaiting review. A clean-looking feed is not evidence that the ledger balance agrees with the statement.

For cards, retain the classifications of the underlying purchases and reconcile the liability. The later card payment reduces cash and the card liability. It should not repeat all the purchase expenses. The CEO can review the statement, reconciliation summary, and unusual purchases without preparing the same work a second time.

If the admin manager controls preparation and payment setup, add a separate review of payment releases and vendor-detail changes where possible. Agree on a practical substitute when staffing prevents full separation. An outside accountant's selected review can provide independent evidence for areas both internal people affect.

4The supporting balance schedules

A supporting schedule lists the records behind a balance sheet amount. The receivable schedule should agree with recorded accounts receivable. The payable schedule should agree with accounts payable. The fixed-asset schedule supports equipment values and depreciation. The loan schedule supports principal, interest, and due dates.

Review receivable aging for overdue invoices, disputes, credits, and unapplied payments. The supplied July and August receivable totals are negative. Those balances call for client-level explanation; they do not establish a specific error. A valid client credit may still need a presentation decision by the accountant.

Review supplier aging and statements for omitted bills or old balances. A zero payable amount may reflect payment practices, but it can also coexist with card obligations or bills not yet entered. The September company card liability is $85,183.05, so examining only supplier payables would omit an important obligation.

Review the debt schedule for principal movements and any current portion. Review the asset schedule for purchases, disposals, depreciation, and changes in useful-life estimates. The repeated fixed-asset total in the company export requires explanation from the supporting schedule before assuming either correctness or a missing entry.

Compare payroll liabilities, tax obligations, and other balances with their underlying schedules. Ask the accountant which filings and remittances need reconciliation. The admin manager should know what each material liability represents and how its settlement is verified.

Close area	Evidence	Result recorded
Cash and cards	Statements and reconciliations	Agreement and outstanding items
Revenue and receivables	Billing schedule and aging	Completeness and collection exceptions
Costs and liabilities	Bills, registers, and schedules	Cutoff and unpaid obligations
Assets and debt	Asset register and loan detail	Adjustments and classification questions

5Adjustments and the review package

An adjustment changes the accounting records to reflect a supported correction or accounting treatment. Record the reason, amount, period, accounts, evidence, preparer, and required approval. Some adjustments are routine under an established policy; others require accountant review.

A close exception is an unresolved item that may affect the records or their interpretation. Each exception needs an owner and next action. Estimate its potential effect only when the evidence supports an estimate. An unresolved missing bill can be described without inventing its amount.

After approved adjustments, regenerate the P&L and balance sheet. Confirm that supporting schedules still agree. If a reviewed report changes later, identify the change and inform the people using the earlier version. A dated final package makes it possible to see which version supported a decision.

The package should include the reporting basis, period, close status, P&L, balance sheet, relevant support summaries, and exception list. Add a short explanation of changes from the preceding month. The CEO should see the causes supported by records and the questions that still need evidence.

A close review can uncover a business issue as well as a recording issue. A correctly recorded overdue invoice still needs collection action. A correctly recorded rising supplier cost may require checking client pricing. Resolve accounting questions first, then use the reliable result to frame management decisions.

Agree a close timetable based on when required records arrive and who must review them. The course does not prescribe a deadline or materiality limit for the company. Choose and document those rules with the accountant and CEO, then track whether the close meets them.

6Practice example: the incomplete September close

This hypothetical exercise is separate from the supplied company figures. A draft September accrual P&L reports $8,000 of net income. A $600 license bill received on October 3 concerns September usage and was omitted. A $900 payment for coverage used only in October was expensed in September. Assume the accountant approves recognizing the September bill and moving the October coverage to a prepayment. Ignore taxes and other adjustments.

Identify the service period and source evidence for each item. State why the document or payment date alone does not settle the September expense.
Calculate corrected September net income. Show each adjustment separately rather than entering the net change without detail.
State the balance sheet effects: the omitted bill increases the payable; the future coverage creates a prepayment.
Add the two items to a close exception list with the evidence, preparer, reviewer, and approval status.
Identify the reports and schedules that should be regenerated after the approved entries.

Check your work

The September license cost reduces profit by $600. Removing the October-only expense from September increases profit by $900. Corrected September net income is $8,000 - $600 + $900 = $8,300.

The license adjustment increases expense and payables by $600. The coverage adjustment increases a prepaid asset and reduces September expense by $900. The original $900 payment still used cash; changing the expense period does not reverse that bank payment.

Keep both adjustments with their service-period evidence and approval. Regenerate the P&L, balance sheet, payable schedule, and prepayment schedule as relevant. Confirm the revised amounts and record the reviewed report version. The arithmetic result alone does not constitute close approval.

7Your company close checklist

The admin manager prepares a checklist for the next agreed completed month. Begin with bank and card reconciliations, invoice completeness, supplier cutoff, payroll register mapping, receivable credits, loan classification, and the asset schedule. Use the company reference to connect the known export questions with actual supporting records.

For each check, name the evidence, preparer, reviewer, target date agreed by the team, and current status. Include a clear route to the accountant for judgment questions. Avoid placing personal payroll detail or banking identifiers in shared course files.

The CEO reviews which unresolved items could change a major decision and approves the reporting status under the agreed process. If the close remains incomplete, label it and retain the exception list. Do not call the result final merely because the meeting has ended.

The deliverable is a reusable checklist, one completed review package, and an exception log. Save the lessons learned from the close: which record arrived late, which check found a problem, and which recurring entry needs a clearer procedure. A repeatable process should make the next month's evidence easier to assemble.

8Going deeper

Going deeper

Materiality concerns whether an omission or misstatement could affect a user's decision. The appropriate threshold depends on the report's purpose, the amount, and the nature of the item. A small vendor-detail change can matter because it affects payment security even if the invoice amount is modest. Agree review thresholds with the CEO and accountant rather than using a generic percentage. A close can also require adjustments that affect prior periods; those need an explicit accounting decision and communication to report users.

9The completed work

A reusable monthly close checklist, reviewed package, and exception log.

Keep approved company work in your finance workspace. The course records study progress in this browser; it does not store your reports or forecast files.

11Glossary

Monthly close: Completing and reviewing accounting records for a month.
Cutoff: Assigning financial activity to the correct reporting period.
Reconciliation: Comparing records that should agree and explaining their differences.
Outstanding payment: A recorded payment that has not cleared the bank at the statement date.
Deposit in transit: A recorded receipt not yet shown on the bank statement at the reconciliation date.
Supporting schedule: A list or calculation showing the records behind an account balance.
Accrued expense: A cost incurred but not yet paid or fully invoiced.
Prepayment: Money paid for a benefit the business will use in a future period.
Payroll register: A payroll record summarizing earnings, deductions, taxes, and related amounts.
Close exception: An unresolved item that may affect the accounting records or their interpretation.
Adjustment: An accounting change supported by a correction or approved accounting treatment.
Materiality: Whether an omission or misstatement could affect a report user's decision.

12Sources

Company examples use the accrual reports supplied on October 6, 2026. Report periods, selected totals and limits are recorded in the company reference. Examples labeled practice use hypothetical inputs.

IRS: Recordkeeping: Official background reading supporting the records, reconciliations, and payment mechanics in this session.
IRS Publication 583: Business records: Official background reading supporting the records, reconciliations, and payment mechanics in this session.
IRS: Employment taxes: Official background reading supporting the records, reconciliations, and payment mechanics in this session.
QuickBooks Online: Reconcile an account: Official background reading supporting the records, reconciliations, and payment mechanics in this session.