I hope our previous post revealed the importance of closing the books monthly/quarterly/yearly. In this post, I will address the closing of the cash accounts and the review of the coding of income and expenses for the closing period for accurateness and reasonableness.
Each month, a reconciliation of the bank accounts should be performed. This will allow you to be aware of any errors in entries made or items on the bank statement that are there in error. Also, it will allow you to record the monthly interest income, if funds are in an interest bearing accounts or any bank charges to expenses. See Exhibit A
Investments should be reconciled each month. All the information, you will need to record investment properly will be included in the statement. See Exhibit B
for investment reconciliation. Investment should be recorded at cost; however, at the end of the month, the following items should be recorded:
·Interest Income
·Realized gains/losses
·Fees paid
·Dividend Income
·Interest Expense
·Unrealized gain/loss
·Capital Gains
·Purchases of Investments
·Sales of Investments
Besides the cash account, if the organization has petty cash accounts, that should also be closed each month. See Exhibit C for monthly closing procedures. All petty cash should be supported by receipts, so the funds are accounted for properly, each month.
Each month, it would be good to review the coding of income and expenses for accurateness and reasonableness. If all expenditures are approved by a purchase order/requisition, then the person reviewing should be familiar with all charges. Some ministries and churches may have income that has been designated for a particular use, building program or endowment. Thus, the organization should record these funds in a temporary or permanently restricted income account. This is discussed further in our December 7, 2007 blog called “Designated Contribution.”
In our next post we will discuss property, plant and equipment.
Are you ready? - Keep blogging...Michelle Francis
