How do you know when you're ready to close?

[debbieg]

We started using PC for accounting at the beginning of 2010. When 2010 ended I did not close out any months. I have been forced recently to close a couple because of the 18 month limit. While investigating some other problems recently, I found a few errors from months in 2010 and was able to correct them since the months were still open.

I would like to close out all the months from 2010 but am wondering how do I know when everything is correct. Are there any particular reports that I should run and validate before doing the final closing?
Thanks,
debbie

[JohnDMeyers]

Debbie:

I am a non-accountant. Hopefully, someone who plays an accountant in real-life will offer their input.

I reconcile the bank accounts, print the standard reports, do a backup, and close the month.

Every year, when our church does get a "real" accountant to audit our books, he looks at the Trial Balance and Journal Entry reports. If there had been any typos, these reports tend to point to them.

I just ran both to see what information is on them, and truthfully, I can't tell anything from them. But then, again, I am not an accountant. (or possibly, there have been no "typos" this month)

[Eden Whitehead]

I reconcile the bank accounts, print the standard reports, do a backup, and close the month.

John, which reports do you include in "the standard reports"? Obviously, Trial Balance and Journal Entry since you mentioned them specifically, but what other reports do you run as year-end "standards"?

Thanks, as always for your generous help!

Eden

[debbieg]

Ugh...I just typed a long response but left it for awhile and apparently,it logged me out. I'll have to re-type later.
John, you may not be a real accountant but did you at least stay at a Holiday Inn Express last night?

[JohnDMeyers]

I include the Balance Sheet, and Income and Expense Statement, which I also use for our YTD budget report.

On the Income and Expense Statement, I set my default columns up like this:
Column 2 - Current budget
Column 3 - Current budget difference
Column 4 - Current budget percentage

I use the range January - December, because I want to measure the YTD actual expenses against the "yearly" budget. By using the month range to be the whole year, it is the same as using the Budget report set to "yearly". I find it easier to read than the standard budget report.

Then, I also run an Account Activity report on our General Tithes and Offerings income account. I enter those numbers into a spreadsheet and plot a trend line of giving for the year.

[debbieg]

I guess what I was looking for were reports to tell me if I had made any mistakes along the way. (I know, should have been doing that each month). I accidentally found a mistake concerning an entry with a restricted fund. That led me to run a report for the entire year to compare how much had been released from restricted funds with how much was used in the corresponding expense funds. This allowed me to catch a couple of other errors. So i was wondering if there were any other global kind of things like that which should match up that I could run reports to find.

One specific area that I was unsure of, was a second fund that was set up in 2010 but is no longer in use. Our church started a satellite ministry in 2010 and the pastor wanted to keep track of the income and expenses for that ministry separately. Fund 02 shared the checking account with our general Fund 01. In 2011 we turned that ministry over to our state convention and we are no longer involved financially. As of the end of 2010, there was a negative balance in the unrestricted net assets for Fund 02. Do I need to do something specifically to close out that fund? Does the negative balance in fund 02 need to be moved to Fund 01?
thanks,
debbie

[JohnDMeyers]

Debbie:

A negative balance in Fund 02, means one of two things: 1) the satellite ministry "borrowed" money from the General Fund simply because they shared a checking account or 2) The General Fund unwittingly made a contribution to the other ministry simply because they shared a checking account.

In case #1 and depending on the situation, it may be appropriate to ask the other ministry for that money.

In case #2, just count it as a donation from the General Fund to that other ministry. Transfer enough money from the General to Fund 02 to "zero it out". Call it an expense, like, "donation to satellite ministry"

CR 01-1110-000 checking
DB 01-5210-000 donation to other ministry (or you could use a transfer account 01-9210-000)

DB 02-1110-000 checking
CR 02-4210-000 receive gift from General Fund (or you could use a transfer account 02-9210-000)

[debbieg]

John, it wasn't really scenario #1 or #2. I probably set this up wrong to begin with. Our church decided up front that we would incur expenses to start up this ministry. Everything was being paid out of our regular checking account. When the pastor asked to be able to track these separately, I set up fund 02. the chart of accounts was copied from fund 01 and just had the "02-" prefix. When I paid a bill, I would credit checking account "02-1110-000" and debit the appropriate expense account "02-5xxx-000".
so it seems that I don't need to do another transaction that involves the checking account because the money has already been spent. It's the net asset accounts that I thought would need adjusting. If I always run combined reports, then I will see the true net assets of the church. But I hate to keep doing that when fund 02 is really no longer in use. I just want to make some kind of adjustment so that Fund 01 reflects the correct assets by itself.
Debbie

[JohnDMeyers]

If you think it was a "beginning balance" error, then make another one to correct it:

DB 01-1110-000 checking
CR 01-3110-000 equity

and document what it is.

[Eden Whitehead]

I include the Balance Sheet, ....

John, thanks for the good info! -- Eden