Month-end close

You close the month so the numbers can be trusted: every transaction in the right period, every balance sheet account supported by a schedule that ties to the ledger, every journal drafted with evidence, and a P&L that has been read line by line for anything odd. The standard is a close the owner's accountant would accept without reworking, done to a calendar, with open issues listed rather than hidden.

When to use

• "Close September."
• "Get the books ready for the month-end pack."
• "Are the accounts right for last month?"
• Set up a recurring close: use cronjob for a reminder on the last working day and a status check on working day 3.

What you need

• Access, best first: a connected app (Xero, QuickBooks, Stripe) on the Connections page; your own browser signed in by the owner to the accounting software and the bank's website (read and download only); or exports the owner gives you (trial balance, ledger detail, bank and card statements, aged receivables and payables, payroll reports). If none is there, ask with clarify for the specific reports.
• The prior month's close file, including its balance sheet schedules and reversing journals.
• The owner's materiality level for accruals and variance review, saved in memory. If none is set, propose one (see Method step 1) and get it confirmed.
• Contracts or schedules for recurring items: rent, insurance, annual software, loans, subscriptions billed in advance.
• Who may post: whether you may post journals and set lock dates yourself, or must hand drafts to the owner or bookkeeper. Record the answer in memory.

Method

1. Agree materiality once. It decides what you accrue and which variances you explain. A common audit-style starting point is in the range of 0.5% to 1% of annual revenue for the whole set of accounts; for month-end accruals use a much lower per-item level, such as a figure the owner picks that is small relative to monthly costs. Propose a number, explain it in a sentence, and let the owner set it.
2. Build the close calendar in a todo list and a Close sheet (template in references/close-checklist.md), by working day after month end (WD1 to WD5). Tasks have dependencies: you cannot reconcile before the cash entries are in, and you cannot review the P&L before the balance sheet ties.
3. Pre-close (last 2 to 3 days of the month). Ask the owner for: bills received but not entered, work delivered but not invoiced, staff expense claims, anything unusual (new loan, asset purchase, large refund).
4. WD1: cash and sub-ledgers. Feeds fully coded. Every bank, card, savings, loan and processor clearing account reconciled to its statement, difference 0.00. Sales invoices raised for everything delivered in the month (cut-off). Bills entered for everything received in the month.
5. WD2: accruals and deferrals. Draft journals (patterns in references/journal-entries.md):
   • Accruals for costs incurred but not yet billed (utilities, contractors, professional fees, interest). Set them to reverse on the first day of next month.
   • Prepayments released for costs paid in advance (annual insurance, annual software): monthly charge = amount paid / months covered.
   • Deferred income for amounts billed in advance (annual subscriptions, deposits): release only the part earned this month.
   • Depreciation from the fixed asset register (straight line: (cost minus residual value) / useful life in months, or the method the accountant set).
   • Payroll journal: gross pay, employer taxes and pension to expense; net pay, tax and pension to liabilities. Tie it to the payroll provider's report.
6. WD3: balance sheet reconciliations. Every balance sheet account gets a schedule that ties to the ledger balance to the cent: bank, receivables (aged report total = ledger control), payables (aged report = ledger), prepayments, accruals, deferred income, fixed assets, payroll liabilities (should equal what is due to be paid next month), VAT, GST or sales tax control (should equal the return figure for the period, or the period to date), loans (lender statement), director's loan or owner's equity. Suspense and clearing accounts must be zero or explained line by line.
7. WD4: P&L flux review. Compare each P&L line with last month, the same month last year and the budget. Explain any line that moves by more than 10% and by more than the materiality amount. Look for: costs missing (a monthly supplier with no bill this month), costs doubled (two months in one), revenue booked in the wrong month, gross margin out of its normal range, negative balances on expense lines.
8. WD5: sign-off and lock. List open issues, the journals posted or awaiting posting, and the balances you could not support. Recommend a lock date. Setting a lock date (Xero) or closing date (QuickBooks) is the owner's decision: do it only with their explicit go-ahead.
9. Tax deadlines. Note any VAT, GST, sales tax or payroll filing due before the next close, with the date. Check the date on the tax authority's site with web_search and cite it. You never file; the owner or accountant does.
10. Close retrospective. One line on what slowed the close and one change for next month. Save it in memory.

Worked example: WD2 journals for September

Item	Working	Journal
Electricity, bill not yet received	Average of the June to August bills: 410.00	Dr Light, heat and power 410.00; Cr Accruals 410.00; reverses 1 Oct
Annual insurance paid in July, 2,400.00 for 12 months	2,400 / 12 = 200.00 a month	Dr Insurance 200.00; Cr Prepayments 200.00
Annual subscription invoiced 1 Sep, 1,200.00 net	1,200 / 12 = 100.00 earned in September	Dr Deferred income 100.00; Cr Revenue 100.00 (1,100.00 stays deferred)
Laptop 1,800.00, 36-month life, nil residual	1,800 / 36 = 50.00	Dr Depreciation 50.00; Cr Accumulated depreciation 50.00
Payroll per the provider's report	Gross 20,000, employer costs 2,900, net pay 15,200	Dr Gross wages 20,000 and Dr Employer costs 2,900; Cr Net wages payable 15,200 and Cr Tax and pension liabilities 7,700

Every journal ties to a document: the three prior bills, the policy schedule, the subscription invoice, the asset register, the payroll report. Debits equal credits on every one (22,900 both sides on the payroll journal). Full patterns, including prior-period corrections, are in references/journal-entries.md.

Close calendar at a glance

Day	Done when
Pre-close	Owner's list of unbilled work and unentered bills received; feed coded to date
WD1	Every cash, card, loan and processor account shows a 0.00 difference; cut-off checked both ways
WD2	Last month's reversals confirmed; accruals, prepayments, deferred income, depreciation and payroll drafted or posted
WD3	Every balance sheet schedule equals its ledger balance; suspense and clearing at zero
WD4	Flux review written; every variance over threshold has a named cause and amount
WD5	Close memo, open issues and lock recommendation sent; lock only on the owner's go-ahead

A sole trader with no stock or staff can compress this into two days; a business with stock, payroll and several accounts needs all five. Keep the order whatever the size: cash, then sub-ledgers, then schedules, then review. The dependency list and the full checklist are in references/close-checklist.md.

What "supported" means for a balance

A balance is supported when a third party's document or an itemised list reproduces the ledger figure to the cent: the bank statement for cash, the aged report for receivables and payables, the lender's statement for a loan, the tax report for the tax control account, and a line-by-line list with evidence for accruals and prepayments. "Same as last month" is not support; neither is a rounded figure.

Output

• close-<YYYY-MM>.xlsx with sheets: Calendar (task, WD, owner, status, evidence link), Journals (date, accounts, debit, credit, narrative, reverses on, evidence, posted Y/N), BS recs (account, ledger balance, schedule balance, difference, preparer, notes), Flux (line, this month, last month, budget, variance, explanation), Open issues.
• A close memo of half a page: close status, journals by type and total, balances not yet supported, variances worth the owner's attention, decisions needed (with a deadline).
• A show_card with the status: tasks done out of total, accounts reconciled out of total, open issues, lock recommendation.

Checks before you finish

• Every journal balances (debits equal credits) and has a narrative and evidence.
• Every balance sheet account has a schedule, and every schedule difference is 0.00 or explained.
• Suspense and clearing accounts are zero or itemised.
• Last month's reversing accruals did reverse on day one; nothing is double accrued.
• Trial balance debits equal credits, and the balance sheet balances.
• Retained earnings brought forward equals last year's closing figure (it should not move during the year except at year end).
• Every flux item above threshold has an explanation that names a cause.

Pitfalls

• Closing on unreconciled cash. Every later number inherits the error. Bank first.
• Accrual creep. Accruals that never reverse inflate costs. Always set reversal, and check it happened.
• Expensing annual bills in the month they are paid. Spread them with a prepayment schedule.
• Recognising annual billing as this month's revenue. Defer it.
• "Timing" as an explanation. Say what was early or late, by how much, and when it reverses.
• Editing a closed period. Never change a locked month. Post a correction in the current month with a narrative, and tell the owner.
• Treating payroll liabilities as expenses. Payments of tax and pension clear liabilities.

See also

• bank-reconciliation, categorise-bank-transactions, management-accounts-pack.