Month End Closing Procedures

As you can see, closing out the month in The General Store is basically a 4 step process. Here is a summary of the 4 steps:

  1. Perform the Month End Closing procedure in the Accounts Payable Module. This creates the month end journal entries generated from monthly accounts payable activity.
  2. Run the Journal Entry Edit Processing function in the General Ledger module to generate the Journal Entry Edit Report. Review all journal entries listed on this trial balance report and make any necessary corrections through Journal Entry File Maintenance.
  3. Perform the Detailed General Ledger Posting in the General Ledger module. If you find any errors, go back to step 2 to locate the source of the errors. Make any necessary corrections and rerun the detailed general ledger posting.
  4. After successfully completing the Detailed General Ledger Posting, run your Financial Statements by pressing the "F5" key from the General Ledger Systems Menu. This will complete the month end closing process in The General Store.

Now for the Detail:

Month End Closing Procedures in A/P

As part of your monthly closing procedure (discussed in chapter 4), you must first close accounts payable each month. Closing posts all monthly entries to the general ledger system. Upon pressing "F6" from the Accounts Payable Systems Menu, you are prompted to enter the month and year you are closing. Upon doing so, the system goes directly into the closing process. There are two month end closing reports produced by selecting this function. They are the Accounts Payable Journal and the Cash Disbursements Journal.

The Cash Disbursements Journal

The Cash Disbursements Journal list all checks, in check number order, paid during the month. It posts total checks written as a credit entry to the Cash Disbursements account, as defined in the default general ledger posting accounts (usually 100-010, see chapters 3 and 4). The offset entry posts as a debit to the general ledger account defined as Accounts Payable (usually 300-010). Therefore, if you wrote $10,000 in checks for a given month, the journal entry created would appear as follows: 300-010 Accounts Payable....................10,000100-010 Cash Disbursements..................10,000 The journal entries created by this journal post to the J/E voucher CD**.

The Accounts Payable Journal

The Accounts Payable Distribution Journal posts all invoices entered during the current month. This listing is by ledger posting account number. Totals are produced for each general ledger account and a single journal entry is created. The offsetting entry posts to the Accounts Payable general ledger account (usually 300-010). This entry represents the increase in payables for the accounting month. For example, let's say you entered invoices for $5,000 worth of inventory, $400 worth of cleaning expenses, and $300 worth of freight for the month of July. The journal entry created upon closing would appear as follows: 120-010 Inventory...................5,000700-050 Cleaning Expense..............400700-070 Freight Expense...............300300-010 Accounts Payable............5,700 This entry would be grouped in the J/E voucher AP**.

The Next Step, Posting to the General Ledger

The Accounts Payable Journal and the Cash Disbursements Journal provide necessary sub-journal audit trail for the general ledger system. The next step in closing a month in The General Store involves posting the newly created journal entries to the general ledger and producing financial statements.