Step 8: Month-end Close (preview)

MEETS THE FOLLOWING DCAA REQUIREMENTS

  • Interim (at least monthly) determination of contract costs posted to a book of accounts
  • Accounting system in accordance with GAAP

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Sample Month-end Closing Checklist

Synopsis

We discuss why DCAA insists that you close your books on a monthly basis. The difference between cash basis accounting and accrual basis accounting is discussed.   We provide a sample closing checklist and highlight important reconciliations that are required for DCAA compliance.

Monthly Closes

What does it mean to "close your books"? In the days before computerized accounting systems, accountants wrote their entries into actual books.  At the end of the month, after all entries were made, the books for the month were physically closed, shut tight, even locked away by the controller, to prevent any further entries. A new set of books were then opened for the new month.

Why was it (and still is) so important to prevent changes to the previous month's books? Once financial statement were produced and published, the supporting documentation for those statements was the set of physical books, which had been closed and locked away in the controller's office. Later, during the company's audit, the books would be re-opened and examined. To pass the audit, the numbers in the books needed to match the numbers on the financial statements.

Today's computerized accounting systems have eliminated much of the tediousness of keeping accounting records.  But this same technology has also made it almost too easy to change data in previously closed periods. Fortunately, Quickbooks has a feature that allows you to "close" the books to prevent accidental changes to previous months.  You are able to set a "closing date" and password protect transactions that are dated on or prior to the closing date.

To set the closing date in Quickbooks, navigate to . . .

(To continue reading the full article, click here . . .)

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