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The closing process in accounting involves preparing and adjusting financial statements at the end of a period.
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It's a critical process, but also prone to errors.
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The key steps where mistakes are most likely are, one, identifying and journalizing adjusting entries.
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This is the first step in the closing process.
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Errors can occur if all necessary adjustments are not identified and recorded.
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These adjustments may include accrued expenses, prepaid expenses, depreciation, and inventory adjustments.
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Recommendation would be to regularly review the company's financial transactions and understand the nature of each transaction.
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Action.
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Use a checklist to ensure all necessary adjustments are made.
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Number two, closing temporary accounts.
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Temporary accounts such as revenues, expenses, and dividends are closed to summary account, usually the income summary account.
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Errors can occur if some accounts are overlooked or incorrectly closed...