An accounting process that involves reviewing the entries

30-31 Days time frame represents a well-defined period for accounting purposes. The month-end closure is an accounting process that involves reviewing the entries on records/ledgers, reconcile balances, summarize and analyze transactions to finalize and close out all financial activity for a business for the preceding month. It’s after this exercise when management reports are prepared and published i.e Balance Sheet, Trading profit & loss statement, cash flow statement, trial balance, bank reconciliation statements, aging analysis, customer & supplier statements.

The month-end close is an integral process that helps a business provide accurate financial data on a regular basis. This allows an entity to close the books on financial activities, report financial position and start a new month with a fresh set of records. It is intended to ensure that all transactions have been properly recorded and finances accounted for, clerical errors identified & corrected while fraud and associated risk is detected at an early stage and minimized. Errors & risks can be costly in the long run, once identified they should be mitigated with appropriate internal control measures.

Performing a month-end closure helps build confidence in the company’s financial data which is used to prepare its financial statements. The process ensures that the data in those statements is reliable and accurate for accountability and also helps an entity prepare for tax filings & statutory returns. With proper preparation, systems and personnel in place, this is a sound business practice to be embraced by all entities.

For an effective end month closure exercise, an entity is required to provide the following records/documents;

1. Cash & Cheque Payment vouchers attached with request for quotations(RFQ), Quotations, purchase orders, proforma invoice, delivery notes, invoices & payment receipts to track expenses/purchases.
2. Sales/Revenue receipts.
3. Cash Book(s) & Petty cash register.
4. Bank & M-pesa statements for the business or project.
5. Fixed Assets register.
6. Inventory register.
7. Payroll, list of liabilities & Debtors.