Key takeaways
- Reconcile every cash and card account before you read any report.
- Book accruals and prepaids as journal entries dated the last day of the month, with the support attached.
- Do not plug a reconciliation difference. Find the item, and document the search if you cannot.
- Compare each report to the prior month and to the same month last year, and explain every large move.
Set the close order and the closing date
Close in this order: clear the bank feed, reconcile each bank and card account, clear uncleared and unmatched items, book accruals and prepaids, review payroll and sales tax, then run the reports. Reports come last because every earlier step changes them.
Decision rule: if any account is still open on review day, do not lock the period. Finish that account first, or keep the closing date at the prior month end. In QuickBooks Online, go to Settings, then Account and settings, then the Advanced tab. In the Accounting section, select Edit, change the closing date and save. Only an admin can make this change.
After locking, go to Reports, then Standard reports, search for Exceptions to Closing Date and open it. Intuit describes this report as showing changes made after you close your books. For each change it lists, ask the person who made it why, record the answer in the close notes, and re-run any report the change affected.
Reconcile each bank and credit card account
Start from the statement, not the register. Go to All apps, then Accounting, then Reconcile. Enter the Ending balance and Ending date exactly as they appear on the statement, then select Start reconciling.
Tick each statement line against a QuickBooks transaction until the Difference is $0.00. Then select Finish now, then Done. The saved reconciliation is listed under History by account on the Reconcile page, and that report is the file to give the reviewer.
If the Difference is not zero, test three causes in order. First, a QuickBooks entry that has not cleared the bank yet. Second, a bank line with no QuickBooks entry, usually a missing payment, deposit or fee. Third, a duplicate, where a feed line and a hand entry describe the same item and the account is off by exactly that amount. Search for that amount before changing anything.
Do not force the difference to zero with a journal entry to an expense or income account. A plug hides the cause, and the same unexplained amount returns next month.
Clear uncleared items and the For review queue
Uncleared items fall into three groups, and each has its own test. Checks written but not cashed should be compared with the check register, and a check still outstanding past the client's policy goes back to the payee. Deposits in transit should appear on the next bank statement. Card charges dated near the statement cut-off often post in the following period.
Decision rule: if a deposit is recorded in QuickBooks and missing from the next bank statement, check whether it sits in Undeposited Funds and was never sent to the bank. If the bank shows the money under a different amount, the deposit was recorded wrong, and it is not in transit.
Clear the feed items waiting for review before you reconcile. Match each one to the bill, invoice or deposit it belongs to instead of creating a second entry.
Book accruals, prepaids and depreciation
Decision rule: accrue an expense when the service arrived in the month but the bill has not. Record a journal entry dated the last day of the month that debits the expense and credits an accrued liabilities account, and reverse it on the first day of the next month. If the amount is unknown, accrue at the contract rate or the last bill from that vendor and say so in the memo. When the real bill arrives, enter it so the reversal offsets the accrual.
Prepaids follow one rule. If a payment covers a period that runs past the close date, such as a 12-month insurance premium, book the full payment to a prepaid asset and move 1/12 of it to expense each month. If it covers only the current period, it is an expense when paid.
Depreciation comes from the fixed asset schedule, not a running estimate. Post the monthly figure, which is the annual amount divided by 12, as one journal entry, and keep the schedule as its own file so it ties to the fixed asset accounts at year end.
Attach the support to every adjusting entry and write the memo so it names the period and the reversal, for example: Accrual for March services, reverses on the first day of the next month. An entry without support is the first thing a reviewer asks about.
Review payroll and employer tax liabilities
Tie the payroll provider's journal or summary to the general ledger each month: gross wages, employee withholdings, employer taxes, benefits and net pay. The net pay total should match the funding transfer from the bank, and the liability accounts should hold only amounts not yet deposited.
Federal employment tax dates matter for the close. Form 941 is a quarterly return, due by the last day of the month that follows each quarter, and the IRS lists its due dates as April 30, July 31, Oct. 31 and Jan. 31. For tax year 2026, the fourth-quarter Form 941 is due Jan. 31, 2027. A monthly schedule depositor, meaning a client who reported $50,000 or less in taxes during the lookback period, deposits employment taxes by the 15th day of the following month.
Decision rule: once the deposit is recorded, the prior month's federal tax liability should be zero. If an earlier balance still sits in a payroll liability account after the 15th day of the month the deposit was due, treat it as an unpaid deposit and tell the client that week. Do not move it to an expense to clear the balance.
Form 940 and Forms W-2 are annual, with the IRS listing Jan. 31 as the due date. Failure mode: the payroll provider debits the bank once for net pay and taxes. Split that bank line across net pay, the tax liability and provider fees, using the provider's register, rather than booking the whole amount to wages.
Review sales tax and other pass-through balances
Sales tax rules and due dates are set by each state, so keep a state filing calendar for each client. For each filing period, compare the sales tax payable balance in QuickBooks to the total tax on the state return and to the taxable sales in the sales report. The three figures should tie, or the difference should be a named reconciling item.
Decision rule: if the payable balance is higher than the return, look for tax collected and paid to the state but recorded to an expense, and for tax on refunds that was never reversed. If it is lower, look for taxable sales recorded without tax, which usually means a product or service set up as non-taxable.
Failure mode: the owner pays the state from a personal account. Ask for the payment confirmation, record the payment against the sales tax liability from the company side, and record the owner's contribution separately so the payable balance stays right.
Run the P&L and Balance Sheet and compare to prior periods
Run the Profit and Loss for the close month with 2 comparison columns: the prior month and the same month last year. Run the Balance Sheet as of the closing date.
Decision rule: explain every line the client would ask about, in one sentence each, and sort by dollar change rather than percentage. A large percentage change on a small line rarely matters, while a moderate change on a large expense line always does. If the firm has no written threshold, explain the 5 largest dollar moves.
Balance sheet checks that catch most close errors: the bank and card balances equal the reconciled ending balances; Accounts Receivable equals the AR aging summary total; Accounts Payable equals the AP aging summary total; Undeposited Funds is $0.00 or each item is explained; and any suspense or clearing account is $0.00.