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Finance & Accounting
Pages 4 (1004 words)
Company Closing Process Student’s Name Institutional Affiliation Company Closing Process Part one Month-end closing process It is also referred to as end month procedures. They denote the required tasks for ensuring that an entity’s financial records are poised prior to the start of a new month.
Basically there are three procedures completed under month-end process: adjustments, calculations and reporting. Adjustment is the first step where necessary amendments are done on the financial data or information already recorded. During the month, the organization earns revenue and incurs expenses and matches the two. This practice, result in differences between the estimated amount and the actual amount of an item (Bosua & Beer, 2009). For example, interest expense incurred on the prevailing firm’s loans increase the amount to be paid (principal and interest). The original amount to be paid was the principal, while the actual amount paid at month end is the principal plus interest. Therefore, adjustment has to be made to reconcile the two amounts. Calculations After the above adjustments are made, the affected individual accounts have to be updated. The amounts for adjustment are calculated and appropriate entries made to the appropriate ledger accounts. For example, in bank accounts adjustment calculations, it is started with the opening balance, add on the deposits made and then subtract the debits for that month. The final figure got, reflect the actual cash balance on the bank account as opposed to the opening balance figure. Reporting After ascertaining the actual amounts of each ledger account, the figures are entered into the organizations database. ...
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