Is Month-end close necessary?

Posted in CategoryTechnical Queries
  • B
    Bunmi Mercy 3 years ago

    A month end close is a series of steps and activities performed by an organization with the aim of reviewing, recording and reconciling activities that occurred during the month. Month end close ensures that every transaction related to the month have been included and are properly classified.

     

    An organization should consider month end close when the volume of transaction is large and material. Asides month end close, an organization can decide to opt for quarterly end close, half year close or yearly end close. However, closing your books of account before the year end will ensure early detection of errors and wrong account classification.

     

    Some of the month end activities includes, but not limited to:

    ·      Inventory count/valuation

    ·      Bank reconciliation

    ·      Petty cash review/count

    ·      Revenue and expenses reconciliation

    ·      Payables and receivables account reconciliation

    ·      Variance analysis

    ·      Payroll management  

     

    Some of the benefits of month end close are:

          i.         It ensures that all transaction have been recorded

        ii.         Ensures proper classification of transactions

      iii.         Ensures that errors are detected early and adjusted for

       iv.         It acts as a form of internal control

        v.         It reduces the workload during year end closing

     

    Does your organization consider month end close? And why? Do you think month end close is necessary?

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