Month-end close

The routine of recording, reconciling and reviewing a month's transactions so the books can be locked and reported.

DefinitionThe routine of recording, reconciling and reviewing a month's transactions so the books can be locked and reported.

The month-end close is the set of steps a finance team runs after each month ends: cut off revenue and expenses, post accruals and deferrals, reconcile the balance sheet accounts to outside evidence, review the results and lock the period. Its measure is days to close, the business days from month end until the numbers are final.

How it is computed

A close is complete when every balance sheet account reconciles to a source document or subledger, every reconciling item is explained, and the period is locked. Days to close counts business days from the last day of the month to that point.

Example

The ledger shows cash of $1,250,400 and the bank statement $1,262,900. Deposits in transit add $4,500 and uncleared checks subtract $17,000: $1,262,900 + $4,500 − $17,000 = $1,250,400, so the account reconciles.

Where it goes wrong

Reconciling items carried forward month after month without being cleared. Posting into a period after it is reported, so the report no longer matches the ledger. The full guide is the month-end close checklist.

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