Month-End Close

Everything in a month-end starts from Accounting, Journal: the New journal button is on the Journal page, and the Asset Register and Accounting Periods are in the accounting sidebar. A typical close runs in a fixed order. First make sure the month’s documents are in — sales, invoices, bills, expenses, payroll, petty cash vouchers and advance retirements. Then post the month’s depreciation, then any manual journals (accruals, prepayments, reclassifications, corrections), then review the Trial Balance and the Income Statement, and only then close the period. The order matters because each step feeds the next: a statement reviewed before depreciation is posted is a statement you will review twice.

Every other posting in AWRA is made by a business document; a manual journal is for everything else. You enter the date it belongs to and a memo, then the lines — an account and either a debit or a credit, never both, with an optional description. Blank rows are ignored. A journal needs at least two lines and at most fifty, and debits must equal credits to the cent. All its lines share one MJ reference, a line with no description takes the memo, and the posting is recorded in the audit log with who posted it, the date and the total. Owner’s Equity, Opening Balance Equity and Retained Earnings are always offered, even in a new workspace that has never posted to them, so opening balances can be entered on day one.

In practice: a Nairobi consultancy accrues the November electricity bill that will not arrive until mid-December. The accountant opens New journal, dates it 30 November, writes the memo “Accrue November electricity”, and posts two lines: debit Electricity KES 48,600 and credit Accrued Expenses KES 48,600. AWRA gives it the next MJ reference and records it in the audit log. When the real bill is entered in December, a second journal dated in December reverses the accrual — a posted journal is corrected by another journal, not by editing the first, so the trail of what was believed at month-end survives.

Each manual journal line can be tagged with a department, a branch and a project. The same three tags appear on expenses and supplier bills. Petty cash vouchers and staff advances carry a department and a project, and a petty cash float’s branch goes on every voucher from it. A branch in AWRA is one of your warehouses, so the same list you already use for stock is the list your profit and loss divides by.

Defaults are chosen to prevent the commonest mistake. On an expense or a bill the branch starts as your own branch, if you have one, but the department starts empty on purpose: pick the department the cost is for, not the department of whoever typed it. A cost keyed by the finance office and tagged “Finance” because that was the clerk’s department makes the finance office look expensive and the department that used the service look cheap. The Income Statement filters by any of the three tags, so you can read a profit and loss for one branch, one department or one project.

In practice: a hardware chain with branches in Thika and Machakos pays a KES 120,000 annual software licence that both branches use. Rather than leaving it untagged at head office, the accountant posts a manual journal moving it out of the prepaid account in two lines — KES 60,000 tagged Thika and KES 60,000 tagged Machakos — against IT Expenses. Filtering the Income Statement by Thika now shows that branch carrying its half of the licence, and the branch manager’s margin is measured on the costs the branch actually incurs.

Fixed assets are depreciated from the Asset Register in the accounting sidebar. You set each asset up once with Depreciate an asset: pick it from your asset register, enter its capitalised cost (which may include delivery and installation) and the date it went into service, and choose straight line with a useful life in months, or reducing balance with an annual rate, plus an optional salvage value. For an asset part-way through its life before it came into AWRA, enter the depreciation already charged. Then choose the asset, accumulated depreciation and expense accounts. If a purchase order or bill has not already put the asset on the books, choose the account to bring it on from — Opening Balance Equity for an opening balance; leave it blank if a purchase already posted it, or you will count it twice.

The register shows each asset’s book value and what is not yet posted; you choose a month, review the preview and post. The rules are fixed. An asset is charged a full month for the month it comes into service and nothing for the month it is disposed of. Posting a month also posts any earlier month not yet charged, oldest first, so a skipped month is caught up, and running the same month twice posts nothing extra. No charge takes book value below salvage; the last charge is whatever is left, so the asset lands on salvage exactly. A month that has not started cannot be posted. Each month debits the expense account (Depreciation Expense unless you chose another) and credits accumulated depreciation, tagged with the asset’s branch. On the 1st of every month, everyone who can manage accounts receives an in-app reminder of any depreciation outstanding for the month just ended — the reminder posts nothing; a person reviews and posts.

In practice: a logistics firm in Mombasa buys a delivery van for KES 3,600,000 through a purchase order, puts it into service on 12 January, and sets it up on straight line over 60 months with a salvage value of KES 600,000. The monthly charge is (3,600,000 − 600,000) ÷ 60 = KES 50,000, and January is charged in full despite the mid-month start. Nobody posts February; when March is posted, February and March are both charged, oldest first. Because the purchase order already put the van on the books, the bring-it-on account is left blank. A forklift on reducing balance at 25% a year with a book value of KES 960,000 would be charged 960,000 × 25% ÷ 12 = KES 20,000 that month, slightly less each month after.

From the asset’s page in the register you enter the disposal date, any proceeds and the account they were received into. AWRA first charges the months the asset was still in use, then removes its cost and accumulated depreciation and books the difference to Gain on Asset Disposal or Loss on Asset Disposal. The disposal date cannot be in the future or in a closed month, and it must fall after the last month already charged. An asset retired in the Assets module stops being charged from the month it was retired, but it stays on the books until you dispose of it in the register.

Two further rules protect the history. A depreciation set-up can be corrected or removed while nothing has been posted from it; once a month has been charged the figures are history, so a set-up with the wrong cost is fixed by disposing of the asset and setting it up again rather than by editing. And the register compares its own totals with the general ledger, so a difference between the two — a depreciation journal posted by hand, a fixed asset account adjusted directly — shows up before your auditor finds it. The single most common double count is posting depreciation by manual journal as well as from the register: use the register only.

In practice: the Mombasa firm sells the van in month 30 for KES 1,900,000 received into its bank account. By then 30 months at KES 50,000 have been charged, KES 1,500,000 accumulated, so book value is 3,600,000 − 1,500,000 = KES 2,100,000. Disposing removes the KES 3,600,000 cost and the KES 1,500,000 accumulated depreciation, debits the bank KES 1,900,000 and books the KES 200,000 shortfall to Loss on Asset Disposal. Had it sold for KES 2,300,000, the KES 200,000 excess would have gone to Gain on Asset Disposal instead.

Bank Reconciliation, in the accounting sidebar on the Premium and Enterprise plans, is where the statement and the books are made to agree before the month is locked. You link each bank to the ledger account your payments already post to, set the date to reconcile from, and import the statement as CSV, OFX (including QFX) or MT940, up to 5 MB; a line already imported from an earlier upload, an emailed statement or the M-Pesa feed is skipped, so overlapping statements never double anything. Each line is then matched to what the books hold — AWRA suggests up to three ledger entries with the same amount and direction within ten days, and Match the obvious ones clears every line with exactly one uncontested candidate — or posted and matched in one step for a bank charge nobody recorded, or ignored.

Completing a reconciliation needs the statement date and closing balance. AWRA shows the books’ balance, less receipts not yet on a statement, plus payments not yet on one, against what the statement says. Only when every statement line on or before that date is matched, posted or ignored and the difference is zero can you complete it, and completing locks every line it cleared. Each account reconciles forward only. Two interactions with the close are worth knowing: a bank charge on a line dated in a closed month cannot be posted from reconciliation — reopen the month or post a manual journal in an open one — and payment-run bank lines reach the ledger only once someone confirms on the run that the bank paid them, so confirm those before reconciling.

In practice: at the end of October a Nakuru dairy imports its bank’s OFX file. Matching the obvious ones clears 212 of 230 lines. Of the rest, 11 are M-Pesa settlements matched by hand, 4 are bank charges totalling KES 2,350 posted and matched to Bank Charges, and 3 are internal sweeps ignored. The check shows a statement balance of KES 4,812,400 against books of KES 4,861,900, less KES 64,500 of receipts banked on 31 October not yet on the statement, plus KES 15,000 of a cheque not yet presented: a difference of zero. The accountant completes the reconciliation, then closes October.

Open Accounting Periods, choose the month (last month is filled in), add a note if you want, and choose Close period. From then on the lock applies to every part of AWRA that posts — POS, invoices, payments, payroll, expenses, petty cash, advances, depreciation and manual journals. An entry dated in the closed month is refused, and nothing already in it can be changed or removed. The permissions are split: create journal entries to post manual journals, view accounting to see Accounting Periods and the Asset Register, and manage accounts to close and reopen periods and to set up, run and dispose of depreciation.

A closed month never stops trading. An automatic posting made while the month is closed — a till sale, say — is not refused; it lands on the first day of the next open month. Depreciation for a closed month is still charged in sequence, and its journal lands on the first open date with a note that it was booked late. A petty cash voucher or advance retirement that was waiting for approval when its month closed still posts on approval, on the first open day. To correct a closed month, reopen it from the same list; a reason is required, and closing and reopening are both recorded with who did it and when. The list shows the last 24 periods you have closed or reopened, and a month that has never been closed is open.

In practice: a Kigali retailer closes September a day early, on the evening of 29 September, to start its review. On 30 September the shop keeps trading: every till sale is accepted, and its entry lands on 1 October, the first open day. The accountant then remembers a KES 35,000 security accrual that belongs in September; a manual journal dated 30 September is refused because the month is closed. She reopens September with the reason “Post omitted September security accrual”, posts the journal, and closes September again. The period list now shows both actions with her name and the times, which is exactly what the auditor will ask to see.