|
At the end of each month, accounting records must be closed and a financial statement must be prepared. As a management tool, it must be prepared on time to reflect the financial condition of the dealership and the operational results for the month and year to date.
The accuracy of the financial statement depends on the accuracy, completeness and timeliness of the supporting records. By month end, all known assets, liabilities, income and expenses have been entered in the accounts. It is important to record liabilities and expenses for services and material received during the month but not paid for by month end. It is also necessary that monthly write-offs of prepaid expenses be recorded each month.
Timely completion of the monthly financial statement will be expedited if recording of documents and transactions is kept up to date daily. A regular routine, as suggested below, should be following each month for recording month-end entries and closing the books:
| 1. |
Reimburse the petty cash fund on the last working day of the month. |
| 2. |
Verify that all accounting transactions occurring during the month have been entered in the journals. |
| 3. |
Record in the General Journal the estimated value of services and materials purchased during the month for which invoices have not been received. These entries should be reversed at the beginning of the following month. |
| 4. |
Compute salaries, wages and commissions earned but unpaid at month end. Enter the total of those amounts in the Payroll Journal under Accrued Payroll and distribute the charges to the applicable account columns. These entries should be reversed at the beginning of the following month. |
| 5. |
From the supporting schedules, enter amounts in the Standard Entries Journal for the following:
- Adjustment of allowance for bad debts.
- Depreciation and amortization for the month.
- Write-off of prepaid expenses, including insurance, interest, taxes, etc.
- Accrual of taxes, including property taxes and payroll taxes.
- Adjustment of used vehicles in inventory to estimated wholesale value.
- Accrual of expenses, such as interest and insurance.
|
| 6. |
Total and balance all journals and post journals to the General Ledger. |
| 7. |
Reconcile the control accounts with their respective subsidiary records and with physical inventory balances, such as:
|
| 8. |
Record in the General Journal any adjusting entries required to bring the subsidiary records and the control accounts into agreement. Post adjustments to the General Ledger. |
| 9. |
Compute General Ledger balances for each account and verify that the General Ledger is in balance. |
| 10. |
Compute and record the adjusted year-to-date liability for corporation income taxes. |
| 11. |
Prepare the Financial Statement. |
|
