Monthly Balancing of Accounts
Monthly balancing of accounts is essentially a routine check to ensure that all financial transactions for the month have been accurately recorded and reconciled. Think of it as making sure your financial ship is sailing smoothly.
- Review Transactions: The bookkeeper first reviews all transactions recorded during the month, including sales, purchases, payments, and receipts. They make sure that every transaction has been entered correctly in the accounting system.
- Reconcile Accounts: Next, they reconcile all accounts. This means comparing the balances in the company’s accounting records to the corresponding information on bank statements. The goal is to ensure that all amounts match. If there are discrepancies, they must be investigated and resolved.
- Check for Errors: The bookkeeper looks for any errors or inconsistencies in the accounts. This could include things like duplicate entries, missing transactions, or incorrect amounts. They correct any errors they find to ensure the accounts are accurate.
- Adjustments: If there are any adjusting entries needed, such as for depreciation or accruals, these are made at this time. Adjusting entries ensure that the financial statements accurately reflect the company’s financial position.
- Generate Reports: Finally, the bookkeeper generates financial reports, such as the income statement and balance sheet, for the month. These reports provide a snapshot of the company’s financial health and are used by management to make informed business decisions.
It’s a meticulous process, but it’s essential for maintaining accurate and reliable financial records.