--- title: "Month-End Adjusting Entries Every Owner Should Know | MCC" description: "A checklist of the adjusting entries to review before you close each month: depreciation, accruals, prepaids, inventory and owner items." url: "https://mcc-solutionsnj.com/bookkeeping/guides/month-end-adjusting-entries-checklist" --- Bookkeeping guide · Updated October 12, 2026 # Month-End Adjusting Entries Every Owner Should Know Reconciling accounts gets the transactions right. Adjusting entries get the timing right. They are the small journal entries made at month end so that income and costs land in the month they belong to. By [Matthew Coleman](/about), MCC Solutions **Quick answer.** Adjusting entries are small journal entries made at month end so income and costs land in the month they belong to. Bank feeds cannot see that you used a month of prepaid insurance, equipment lost value or employees earned wages paid next week. Want this handled for you? Monthly bookkeeping, cleanup and year-end close for small businesses. Start with a free health check of your books. [Free health check](/bookkeeping/health-check)[Get a quote](/bookkeeping/#interest) **Related:** [Owner contribution or loan](/bookkeeping/guides/owner-equity-and-capital-contributions) · [Closing entries and retained earnings](/bookkeeping/guides/closing-entries-and-retained-earnings) · [Void vs delete a transaction](/bookkeeping/guides/voiding-vs-deleting-transactions) **Free tools:** [Early payment discount calculator](/bookkeeping/early-payment-discount-calculator) · [Late payment fee calculator](/bookkeeping/late-payment-fee-calculator) Prefer a file to work in? The [Month-End Close Workbook](/toolkits/month-end-close-workbook) runs the whole close in Excel and tells you when a reconciliation does not tie. [![Intuit ProAdvisor Gold tier badge](/img/credentials/intuit-proadvisor-gold.png)](https://proadvisor.intuit.com/app/accountant/search?searchId=matthew-coleman77)Gold tier in Intuit's ProAdvisor program. [See my Intuit listing](https://proadvisor.intuit.com/app/accountant/search?searchId=matthew-coleman77) Keeping your own books? Tallyfinch does invoices, bank import and reports on your computer. [See Tallyfinch](/bookkeeping/mcc-books-downloadable-bookkeeping-software) ## Why adjust at all Bank feeds capture cash events. They cannot see that you used a month of prepaid insurance, that equipment lost value, or that employees earned wages that will be paid next week. Without adjustments, your monthly profit can swing for reasons unrelated to how the business performed. If you only care about annual taxes, you can bunch these at year end. But monthly decisions need monthly accuracy. ## Depreciation and amortization Record one month of depreciation for each asset on your register. If you amortize loan costs or software development, record that month as well. Use recurring entries so the amounts repeat automatically, and review them whenever you buy or dispose of an asset. ## Prepaids and deferred items Move one month of each prepaid item from the asset account to expense. On the other side, release the earned portion of customer prepayments from deferred revenue to income. Check the schedule balances after posting and see that they match what remains unused or undelivered. ## Want us to handle it? We close the year with you: accounts reconciled, 1099s sorted, and books your tax preparer can use. **Price:** Free review of your books first, then a written quote before any work starts. [Get a free review and quote](/bookkeeping/#interest) [1099 and year-end cleanup](/bookkeeping/1099-and-year-end-books-cleanup) ## Accruals Record wages earned but not paid, interest accrued, and vendor work completed but not billed. Add unbilled revenue for work done but not yet invoiced if you use accrual reporting. Set these to reverse on the first day of next month so the real bills do not double count. ## Inventory and other balance checks If you track inventory, update it for the period using the count or system values and record shrinkage or write-downs. Review owner items: personal charges to move to draws, reimbursements owed to the owner, and loans between owner and company. Then review sales tax and payroll liabilities against the filings. Balances should be explainable by what is due, not left over from past errors. ## Final review before locking After posting entries, run the profit and loss for the month and compare it to the prior month and the same month last year. Large swings should have a reason you can state in a sentence. Print or save the reports, then set a closing date in the software so past periods are not changed by accident. If you outsource the books, ask for a short list of the adjustments made each month. It teaches you how your business works and makes your CPA's year-end work easier. Keep a one-page close checklist in a shared folder with each recurring entry, the amount source and who does it. Tick items off each month and note exceptions. When a bookkeeper changes or you hire help, the checklist transfers the knowledge in minutes rather than weeks, and it gives your CPA a clear explanation of how monthly numbers are produced. ## Common questions **Do I need all of these every month?** Only those that apply and are significant. Small amounts can be handled quarterly or at year end if your CPA agrees. **What is a closing date?** A software setting that blocks changes before a chosen date unless a password is entered. **Can adjustments change my tax return?** They can, depending on your accounting method. Share your adjusted reports with your tax preparer. This guide is general information, not tax, legal or accounting advice. Rules, fees and due dates change; check with the IRS, the NJ Division of Taxation or a licensed professional for your situation. Let us handle it [### Monthly bookkeeping Categorizing, reconciling and monthly reports, with cleanup, payroll and NJ filings available. Bookkeeping →](/bookkeeping/) [### QuickBooks Online Monthly bookkeeping, cleanup and reconciliation in QuickBooks Online for New Jersey small businesses. Your account stays in your name. QuickBooks →](/bookkeeping/software/quickbooks-online)[### Xero Bookkeeping and reconciliation in Xero for New Jersey small businesses, including cleanup and moving from spreadsheets or another program. Xero →](/bookkeeping/software/xero)[### Zoho Books Bookkeeping and reconciliation in Zoho Books for New Jersey businesses, especially those already using other Zoho apps. Zoho Books →](/bookkeeping/software/zoho-books) More guides - [Year-End Bookkeeping Close: Steps Before Tax Time](/bookkeeping/guides/year-end-bookkeeping-close-steps) - [What Is an Audit Trail in Bookkeeping?](/bookkeeping/guides/audit-trail-in-bookkeeping) - [Simple Internal Controls for Small Business Money](/bookkeeping/guides/internal-controls-for-small-business-money) - [Employee Fraud Red Flags for Small Business Owners](/bookkeeping/guides/employee-fraud-red-flags-in-small-business) Free tool - [Bookkeeping health check](/bookkeeping/health-check) [All guides](/bookkeeping/guides) Reach small business owners, freelancers and bookkeepers who read this guide: [advertise here](/advertise#bookkeeping). Do it yourself ### Month-End Close Workbook A real month-end close in one Excel file. It tells you when a rec does not tie, which variances still need an answer, and when the period is ready to lock. [See what's inside ($19)](/toolkits/month-end-close-workbook)14-day full refund Course: [Small Business Bookkeeping Basics](/courses/small-business-bookkeeping-basics) ($49) covers chart of accounts, reconciliations, the monthly close, payroll and 1099 basics for owners. It is training with a certificate of completion, not a credential. [![Cover of Bookkeeping Fundamentals (ebook) by Matthew Colt](/img/toolkits/bookkeeping-fundamentals-ebook/cover.webp)](/toolkits/bookkeeping-fundamentals-ebook) From the bookshelf ### Bookkeeping Fundamentals A college-level bookkeeping course, without the tuition. By Matthew Colt, $9.99 as an ebook (EPUB and PDF). [See the book](/toolkits/bookkeeping-fundamentals-ebook) [Read the first pages free](/toolkits/bookkeeping-fundamentals-ebook#free-starter) Not sure which costs and income to accrue before you close the month? See [accrued expenses and accrued revenue, with the entries](/bookkeeping/guides/accrued-expenses-and-revenue-explained). ## Rather have us keep the books? Ask for a quote. [Get a Quote](/bookkeeping/#interest)[Call (908) 444-6373](tel:+19084446373)