Company Closing Process Essay Example | Topics and Well Written Essays - 1000 words

Company Closing Process - Essay ExampleBasically there be three procedures spotless under month-end process adjustments, calculations and coverage. Adjustment is the first step where necessary amendments are done on the financial data or information already recorded. During the month, the validation earns revenue and incurs expenses and matches the two. This practice, result in differences between the estimated amount and the veridical amount of an item (Bosua & Beer, 2009). For example, interest expense incurred on the prevailing firms loans sum up the amount to be paid ( jumper cable 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 make 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 examination 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. The personnel responsible for the month-end procedures avails several reports reflecting the organizations financial position in different ways, such as pelf and loss statement, to the management. Year end close process The year end process refers to a set of activities the alliance performs to close financial books, make adjustments, class errors and produce financial statements such as balance sheet in correspondence with existing rule and regulations such as international financial reporting standards (IFRS) and generally accepted accounting pr inciples (GAAP). These activities involve several personnel such as accountants, bookkeepers and financial manager working under guidance of senior round (Warfield, Weygandt & Kieso, 2008). There are four basic activities completed adjustment entries posting, error correcting, trial balance supplying and financial statement preparation. Under adjusting entries, postings are made to reflect exactly what the company made and spent of the period under review. The adjustments concern prepaid expenses and unearned revenues. Prepaid expenses refer to cash paid by the business in advance understanding that specific tasks will be performed in its favor in the future, whereas unearned revenue refers to the cash money the company accepted promising to provide services or goods at a future date. In correcting errors, the companys management is able to remove the numerical imprecision from the book closing mechanism. The errors are a result of regulations changes, numerical incorrectness and poor accounting rules application. This is a vital activity as it is entire to the closing process of the companys financial statements. Trial balance preparation comes after error corrections and adjustment postings. The trial balance preparation helps managers verify the accuracy of the already completed and closed accounts. The trial balance checks the total debits and credits of all the involved accounts. If the two, total debits and total credits, are jibe most likely the accounts are accurate. However, it should be noted