Month End Glossary
Plain-English definitions of 13 key month end close terms — from accruals and bank reconciliation to journal entries, prepaid expenses, cut-off, and trial balance.
Accrual
Recording a revenue or expense in the period it's earned or incurred, before cash actually moves. For example, recording December rent in December even if it's paid in January. Accruals ensure your financial statements reflect the true activity of each period.
Bank Reconciliation
The process of confirming that your QBO records match your actual bank statement, line by line. A core step in month end close. When complete, your QBO ending balance and bank statement ending balance agree to the cent.
Closing the Books
Finalizing all transactions and adjustments for a period so the financial statements are accurate and complete. Once a period is "closed," changes should not be made without proper justification. Prior period adjustments have accounting and tax implications.
Cut-Off
The point in time at which transactions are assigned to a given period. Good cut-off means expenses and revenue are recorded in the period they belong to, not when cash moves or when you get around to entering them.
Deferred Revenue
Cash received from a customer for work not yet delivered. Recorded as a liability until the work is performed, at which point it's recognized as revenue. Common for subscriptions, retainers, and advance payments.
EDD (Employment Development Department)
California's state agency that administers payroll taxes, State Disability Insurance (SDI) and Personal Income Tax (PIT) withholding. Employers file quarterly returns (DE 9 and DE 9C) and make deposits through the EDD's e-Services for Business portal.
Form 941
The federal quarterly payroll tax return filed with the IRS. Reports total wages paid, federal income tax withheld, and Social Security and Medicare taxes (FICA) for the quarter. Due April 30, July 31, October 31, and January 31.
FTB (Franchise Tax Board)
California's state agency responsible for personal income tax and business entity taxes. Relevant for estimated tax payments, state income tax returns, and LLC fees.
IRS (Internal Revenue Service)
The federal agency responsible for administering and enforcing federal tax law, income taxes, payroll taxes, and self-employment taxes. Most federal tax deposits and returns are filed through the IRS's Electronic Federal Tax Payment System (EFTPS).
Journal Entry
A manual accounting entry used to record transactions that don't flow through the normal invoicing or bill payment process, such as depreciation adjustments, accruals, prepaid expense amortization, or corrections. Prepared by your NCO bookkeeper at or near month end.
Prepaid Expense
A payment made in advance for something not yet used or received. Recorded as an asset when paid, then expensed proportionally as the benefit is consumed. Example: an annual insurance premium paid upfront is recorded as a prepaid and expensed monthly.
Prior Period Adjustment
A correction made to a prior month or year's records. Can affect financial statements and tax filings. Should only be made with your NCO bookkeeper's involvement, not something to correct by just changing a transaction.
Reconciliation
The general process of confirming that two sets of records agree. Most commonly used for bank reconciliation, but also applies to credit cards, lines of credit, accounts receivable, accounts payable, and payroll liabilities.
Trial Balance
A summary of all account balances at a point in time, confirming that total debits equal total credits. Used internally by your bookkeeper as a check before producing financial statements.