Monthly close and reliable records
Clear definitions and practical examples to help you understand the numbers and decisions.
Month-end close
Month-end close is the controlled process of completing and testing the accounting records for a reporting month. It includes collecting late information, posting transactions, reconciling material balances, recording supported cut-off and estimate adjustments, investigating unusual movements, and reviewing the resulting reports. Recording an invoice is bookkeeping; closing asks whether the month as a whole is complete, correctly classified, and supported.
Read the explanationYear-end close
Year-end close completes the accounting records for the annual reporting period and supports the annual financial statements. It includes the disciplines of a monthly close—cut-off, reconciliations, adjustments, review, and evidence—plus annual work required by the entity's reporting framework, tax position, governance timetable, audit needs, and disclosures. It is not simply the December close with a different label.
Read the explanationClosing calendar
A closing calendar is the operating schedule for the close. It states what work must be done, in what sequence, who prepares it, what evidence or input it needs, who reviews it, and when it is due. It links accounting tasks to the departments that create the underlying facts—operations, payroll, purchasing, sales, and treasury. A calendar makes dependencies visible; it does not make an unsupported reconciliation accurate.
Read the explanationBank reconciliation
A bank reconciliation compares the cash balance in the accounting records with the balance reported by the bank for the same date. The two figures often differ for understandable timing items: a payment may be recorded in the books before the bank clears it, or cash may be deposited before the bank statement reflects it. Bank charges, interest, duplicate postings, and errors also create differences.
Read the explanationAccount reconciliation
An account reconciliation compares a general-ledger balance with independent evidence or a detailed subledger, then explains and resolves the difference. For cash, the evidence is usually the bank statement; for receivables, it may be a customer-by-customer ledger and subsequent cash receipts; for payroll, approved registers, tax filings, and payment records. A completed reconciliation does more than carry a signature: it shows the balance, supporting total, reconciling items, dates, evidence, and review.
Read the explanationControl account
A control account is a general-ledger account that summarises a category of individual balances held in a subsidiary ledger. Trade receivables, trade payables, and inventory are common examples. The general ledger gives the total used in financial reporting, while the subsidiary ledger shows the individual customer invoices, supplier bills, or stock records that make up that total. Reconciling the two checks that interfaces, batch postings, and manual journals have kept the total and detail aligned.
Read the explanationSuspense account
A suspense account is a temporary general-ledger account for a receipt, payment, or journal amount whose correct destination is not yet known. It keeps the books balanced while finance obtains the missing evidence, but the balance has no useful business meaning until each item is identified and moved to its proper account. A suspense account is different from a supported reconciling item: the latter has a known cause and expected clearing path; suspense begins with an unresolved classification or source.
Read the explanationAdjusting entry
An adjusting entry changes ledger balances at close so the accounts reflect information about the reporting period that ordinary transaction processing has not yet captured. Common adjustments record an accrual, release a prepayment, calculate depreciation, recognise an allowance, or correct a cut-off amount. The entry must follow evidence and an accounting policy; it is not a tool for moving profit toward a target.
Read the explanationReversing entry
A reversing entry is a journal posted at the start of a new period to undo a specified prior-period adjustment. It is often used for a short-term estimated accrual when the next period's normal invoice or payroll process will record the actual cost. The prior-period accounts retain the adjustment; the reversal merely clears the temporary balance so the actual entry can be processed once.
Read the explanationAccrual
An accrual is the recognition of income or expense in the period in which it is earned or incurred when billing or cash movement occurs later. In practical close work, the word often means a specific adjustment based on work performed, goods received, contract terms, or a supportable estimate. An expense accrual normally creates a liability; an income accrual may create a receivable, contract asset, or another balance depending on the right to consideration and the applicable requirements.
Read the explanationAccrued expense
An accrued expense is an expense recognised for goods or services the business has received before it has paid, and sometimes before it has received the supplier's invoice. The corresponding credit is normally an accrued-expense liability. The amount should be based on the best available evidence: a contract rate, approved work record, goods-received note, usage data, or a reasoned estimate.
Read the explanationAccrued income
Accrued income is income recognised because the business has earned it under the relevant terms before it invoices the customer or receives cash. The other side may be a receivable when the only remaining condition is passage of time, or a contract asset when another condition must be met before invoicing; classification depends on the contract and applicable requirements. The name does not justify recording hoped-for sales or cash that is merely likely to arrive.
Read the explanationPrepaid expense
A prepaid expense is a payment made before the company consumes the goods or services it bought. Until consumption, it is generally shown as an asset because the company controls a future benefit; as coverage or use occurs, finance transfers the appropriate portion to expense. It is not an asset simply because cash has left the bank: the remaining service or right must still exist.
Read the explanationDeferred income
Deferred income, often called unearned revenue, arises when a business receives consideration before it has earned the related income. The receipt is generally a liability because the company still owes goods, access, support, or another promised service. As it performs, it reduces the liability and recognises income according to the transaction terms and applicable requirements.
Read the explanationAccounting cut-off
Accounting cut-off is the close process for deciding whether a transaction or event belongs before or after the reporting date. The answer follows the relevant economic event—such as delivery, control transfer, service performance, or an obligation incurred—not simply the date on an invoice, purchase order, or bank payment. The applicable contract terms and reporting requirements determine which fact is decisive.
Read the explanationCorrecting entry
A correcting entry fixes an identified error in the accounting records: an omission, duplicate, wrong account, wrong amount, wrong period, or other misstatement. It should clearly link to the original entry and supporting evidence so a reviewer can see the error, the correction, and the affected period. The correct treatment depends on when the error is found, whether a report was issued, and the applicable reporting requirements.
Read the explanationClosing entry
A closing entry transfers the balances of temporary accounts—normally revenue, expenses, and distributions where relevant—into the appropriate equity account at the end of a reporting cycle. It resets the income-statement accounts so the new period begins at zero, while permanent balance-sheet accounts continue. It is a mechanical year-end or period-end step after the accounts have been adjusted and reviewed; it does not fix unrecorded transactions or replace annual financial-statement preparation.
Read the explanationIntercompany reconciliation
An intercompany reconciliation compares balances and transactions recorded by entities in the same group, such as one company's receivable against another's payable or one company's sale against another's purchase. The aim is to identify timing, currency, pricing, or posting differences before consolidation. It does not merely seek matching totals: each side needs evidence of the counterparty, transaction date, amount, currency, and settlement status.
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