Are WE Closed Yet?? (1 of 5)

Many of us understand that once a month/quarter/year a business, ministry or church will need to do an assessment of its activity and the stewardship of that activity. This is considered a monthly/quarterly/yearly closing of the financial records, which is a review or overview of the books, to ensure that they are complete and all information is recorded correctly. In addition, it gives an analysis on how well an organization has done during the month/quarter/year. A similar assessment was performed in the Bible regarding the story of the talents as follows:

Again, it will be like a man going on a journey, who called his servants and entrusted his property to them. To one he gave five talents of money, to another two talents, and to another one talent, each according to his ability. Then he went on his journey. The man who had received the five talents went at once and put his money to work and gained five more. So also, the one with the two talents gained two more. But the man who had received the one talent went off, dug a hole in the ground and hid his master's money. After a long time, the master of those servants returned and settled accounts with them. The man who had received the five talents brought the other five. 'Master,' he said, 'you entrusted me with five talents. See, I have gained five more. His master replied, 'Well done, good and faithful servant! You have been faithful with a few things; I will put you in charge of many things. Come and share your master's happiness!' Then the man who had received the one talent came. 'Master,' he said, 'I knew that you are a hard man, harvesting where you have not sown and gathering where you have not scattered seed. So I was afraid and went out and hid your talent in the ground. See, here is what belongs to you.' His master replied, 'You wicked, lazy servant! So you knew that I harvest where I have not sown and gather where I have not scattered seed? Well then, you should have put my money on deposit with the bankers, so that when I returned, I would have received it back with interest. 'Take the talent from him and give it to the one who has the ten talents. For everyone who has will be given more, and he will have abundance. Whoever does not have, even what he has will be taken from him. Matt. 25:14-21,24-29 NIV

Most of you may know this parable. In like manner, when proper stewardship is not performed over the finances of the business, ministry or church, the entity may receive IRS inquiries and/or audits; monies may be fraudulently used or wasted without the organization being aware. In closing the books, we need to review the cash accounts, review revenue and expenditures to ensure completeness and classification, determine which items purchased represents property, plant and equipment, determine if the organization has operating/capital leases and ensure that all documents are available to support long-term debt (i.e. notes payable and mortgages). If accrual basis is used, the entity will need to determine the account receivable, accounts payable, accruals and prepaid and/or deferred revenue transactions and properly post entries to set up these accounts at year-end.

In the next four blog posts we will address many of these areas, assisting you and your Church’s efforts in closing the books.

In post #2 – we will look at closing cash and reviewing revenue and expenses – Stay tuned.