13 April 2008
A Soft Close is a test of business processes in preparation for year-end financial reporting.
FISCAL YEAR CRITERIA:
Fiscal year close is considered a "hard close" to provide for the preparation of the annual financial statements. To ensure a "hard close," institutions follow the annual closing of the books instructions and record year-end revenue and expense accruals in the period 14 year-end accrual period. The year-end accounting records showing all revenue realized and all expenses incurred as of June 30 become the basis for the annual financial statements, and the external audit of the financial statements.
At the closing of period 14, revenue and expense balances should be recorded as follows:
Revenue: all revenue earned whether or not received Expense: all expenses incurred whether or not paid Deferred Revenue: monies received but not yet earned Prepaid Expense: monies paid for goods and services not yet received
QUARTER END CRITERIA:
Quarter close is considered a "soft close" to provide for the quarterly management reports. Quarterly close includes:
Institutions are required to clear their clearing funds to help ensure that revenues and expenses are recorded in the correct funds on a consistent basis. Quarterly accruals are not required to include expenses from the end of a billing cycle to the end of the quarter. For example, the billing cycle for procurement cards runs from the 27th to the 26th of the following month. The quarterly close contains all full months of procurement card activity, but is not required to include an accrual of procurement card expenses from the 27th to the end of the month. Additional examples of billing cycles that end before the last day of the month might include telecom, utilities, motor pool, campus printing and mailing center, etc.
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