The objective of the monthly close is to ensure that all transactions are correctly distributed so that it is easier to measure progress vs. budget, and assess our true financial position at month-end.
Like year-end closes the key tools are:
- Prepaid expenses
- Deferred revenue
The primary concept is "revenue recognition" - that is recognizing revenue in the month in which it is appropriate rather than in the month in which it is received.
NOTE: The accounts are divided between NYSVMS State-wide activities and Chapter activities. The Chapter Activities are in "other revenue" and "other expense"
ONLY the NYSVMS activities run on a monthly revenue recognition basis
The Chapter activities do not have monthly recognition
State Dues - Monthly Recognition
All State dues are paid into a deferred revenue account.
Each month a journal entry is made as shown below
The formula used - which is recorded in the memo line is
Total dues collected $169345 (recognized) + $343822 (deferred) = $513167
Amount to be recognized = 513167*5/12 = 213820 or Total collected x number of months/12
For the month 213820 (total to be recognized) -169345(already recognized) = $44,474