The month-end AP close checklist
The AP close in six steps, with September's roll-forward and an October tie-out that is short by $5,100: the manual entry nobody entered as a bill.
The accounts payable close answers five questions in order. Are all the bills in? Is every cost with no bill yet accrued? Is every payment recorded? Does the subledger equal the control account? Is anything stale? Each one has a check, and the order matters: you cannot tie out a ledger that is still receiving entries.
- Bills inEnter or chase every bill received, dated by when the goods or service arrived.
- Payments recordedEvery payment run released, matched to its bill.
- AccrualsReceived-not-billed costs accrued; last month's accruals reversed.
- StatementsVendor statements for the vendors that matter.
- This lessonTie-outAging equals account 2000; the roll-forward walks.
- Sign and lockReview, sign, and lock the period.
Step 1: Get every bill in
Post every approved bill dated in the period, and chase the stragglers. The cut-off test is when the goods arrived, not the bill date.
Step 2: Record every payment
Every released payment is matched to its bill, and the bank reconciliation agrees. A payment coded straight to expense from the bank feed books the cost twice.
Step 3: Accrue what has no bill
Run the search for unrecorded liabilities, accrue what it finds, and reverse last month's accruals.
Step 4: Check vendor statements
Reconcile the statements of the vendors that matter, and chase what does not agree. See the statement lesson.
Step 5: Tie out
Prove the aging against account 2000 and walk the roll-forward from last month's balance. A difference gets a name, an owner and a date.
Step 6: Review, sign, lock
Look for debit balances, stale bills and duplicate payments. Then a second person reviews the file, signs it, and the period is locked.
The tie-out in numbers
The roll-forward walks the account from last month's balance to this month's: opening, plus the bills posted, less payments and credits, equals the closing balance. September is the company's first month, so the account opens at zero.
October is busier. The book posts 4 bills to account 2000 in October, and the drill bill's open $6,000 is paid on its due date (the track's assumption, as in the payment-run lesson). Suppose the shelving installer's invoice was posted by journal entry straight to 2000 and was never entered as a bill in the bill-pay tool. Then the control account carries it and the aging does not.
The aging is short by $5,100, which is exactly the shelving entry. A manual journal posted to a control account is the first thing to look for when the two disagree, because nothing in the subledger knows about it: no vendor, no due date, no invoice number to pay. The fix is to put the bill through the subledger and take the manual entry out. Since a posted entry is reversed and not edited, it takes two steps.
Reverse OCT-8, posted to the control account with no bill
| Account | Debit | Credit |
|---|---|---|
| 2000Accounts payable | 5,100.00 | |
| 1510Store fixtures | 5,100.00 | |
| Balanced | 5,100.00 | 5,100.00 |
Reverse the manual entry. The shelving moves out of account 2000 and back to where it came from.
Then enter the installer's invoice as a bill coded to store fixtures. It debits 1510 and credits accounts payable through the subledger, with the vendor, the invoice number and the due date attached, and the aging and the ledger agree again.
The subledger and the control account either agree or there is a finding. The close is the day someone proves it, in writing.
Finished this lesson?
Where this lesson's rules come from
The sources behind this lesson's requirements, by kind. Anything marked as a convention is ours, not the rule-maker's.
- US GAAP
- ASC 405 (opens in a new tab)LiabilitiesFree after registration
- SEC
- SEC Release 33-8238 (June 2003) — Sarbanes-Oxley §404 (opens in a new tab)Management's report on internal control over financial reportingFree to read
- Conceptual framework
- CON 8, Introduction — as amended by Ch. 4, App. A (carrying forward CON 6, ¶139) (opens in a new tab)What accrual accounting is forFree to read
The full map is in US GAAP, and where these rules come from.
The words this lesson teaches
Each links to its glossary definition, which also names the authority behind it and the components that render it.
- CloseThe process of finalizing a periodConvention
- Soft closeA period state in which routine posting has stopped and only adjusting entries by a controller are accepted. In common usage also an abbreviated month-end that estimates rather than fully reconciles — directional numbers, never the basis for external reportingConvention
- Hard closeA close in which every step is done — reconciliations, accruals, review, sign-off — and the period is locked against posting, so its statements can go to lenders, investors and auditorsConvention
- Tie-outProving a GL balance against supporting evidence
- SubledgerThe detail, by customer, vendor or asset, whose total must equal its control account in the GLConvention
- Control accountA GL account whose balance is the total of a subledger — AR, AP, fixed assets — and is posted only from itConvention
- Sign-offFormal approval that a section is complete
- Reversing entryAn entry dated the first day of the next period that exactly offsets a period-end accrual, so the real invoice can be coded normally without double-countingConvention
- AP reconciliationProving that the accounts payable subledger — the open bills by vendor — totals to the AP control account in the GL at period end, with every difference explained. It checks our books against each other
In the founder glossary
This lesson’s ideas, explained for the founder running the company. Each has an entry in the founder glossary.
See also
- Periods & the closeThe month-end close in accounting software: fiscal calendars, period states, cutoff, reconciliation vs tie-out, adjusting entries and restatement.
- Controls & auditAccounting software is a system of controls, and most of them are enforced in the UI: segregation of duties, approvals bound to a version, an append-only audit trail, and evidence attached wherever an auditor will ask for it.
- Schedules, accruals & roll-forwardsEvery balance sheet account needs a schedule behind it, and the schedule has to tie to the GL. Most accounting products ship a ledger and statements and leave the schedules in spreadsheets. That handoff is where closes break.
- Journal entry for accrued expensesAt month-end, debit the expense and credit Accrued expenses for work received but not yet billed. Reverse the accrual on the first day of the next month, then book the vendor's bill as usual when it arrives.
- Journal entry for accounts payableWhen an approved vendor bill is entered, debit the expense or asset it bought and credit Accounts payable. When it is paid, debit Accounts payable and credit Cash.
- Soft close vs hard closeA soft close gets management numbers out fast, on estimates and lighter checks, and leaves the period open. A hard close finishes every reconciliation and review, then locks the period so the numbers are final.
- Accrued expenses vs accounts payable at month-endAP is a bill you’ve received; an accrued expense is a cost incurred before the bill arrives. When to accrue, and how reversing entries work, by example.
- Accounts payable process for startups: intake to paymentHow a bill moves from inbox to paid: intake, coding, approval, scheduling and recording, plus AP aging and who approves what at a 10-person startup.
- ReconciliationMatching each line in your books to an outside record, like the bank, Stripe or payroll, until nothing is left over.
- Period locksA control that blocks posting into a month once it's signed off, so the numbers you sent the board stay put.
- CloseChecklistTasks, owners, blockers, sign-off.
- AccountTieOutEvery BS account, proven against its evidence.
- AgingTableAR/AP buckets, 0-30-60-90+.
- PeriodStatusState, provenance, and the next action.
- RollForwardOpening → movements → closing → tie. The universal shape.