GOVERNMENT OF RAS AL KHAIMAH

2013
Month End Closing Policies and Procedures

Finance Team
Government of Ras Al Khaimah

TABLE OF CONTENTS

1. INTRODUCTION ..............................................................................................................................................3
2. PURPOSE ......................................................................................................................................................3
3. SCOPE............................................................................................................................................................3
4. DEFINITIONS ...............................................................................................................................................3
5. POLICIES.......................................................................................................................................................3
5.1. Month-End Pre-closing steps .....................................................................................................................3
5.2. Month-End Closing steps. ..........................................................................................................................4
5.3. Month-End Post-closing steps. ...................................................................................................................4
6. PROCESSES ..................................................................................................................................................5
6.1. Month-end Pre-closing processes ...............................................................................................................5
6.2. Month-end closing processes......................................................................................................................5
6.3. Month-end Post-closing processes .............................................................................................................5
7. PROCEDURES ..............................................................................................................................................6
8. PRE-CLOSING RESPONSIBILITIES. .........................................................................................................6
9. CLOSING CHECKLIST ................................................................................................................................7
10. PROCESS MAP .........................................................................................................................................8

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Government of Ras Al Khaimah

1. INTRODUCTION
Month-end closing processes using the enterprise-wide, Systems Application Products (SAP) software
include the closing of posting periods in the FICO module, the Materials Management module (MM),
and the FM module. This directive outlines the finance and finance-related roles and responsibilities,
along with the policies necessary to employ and consistently apply best business practices when
preparing to close, closing, and reconciling financial accounts each month.

2. PURPOSE
To establish roles, responsibilities, and policies for monthly, pre-closing, closing, and post-closing
reconciliation processes.

3. SCOPE
Applies to all government departments, hereinafter referred to as departments, under the Government’s
jurisdiction that use SAP.

4. DEFINITIONS
Month-end closing, The work that is performed at the end of a posting period.

Year-end closing, An annual balance sheet and profit and loss statement, both of which must be created
in accordance with the legal requirements of the country in question.

Clearing, A procedure by which the open items belonging to one or more accounts are indicated as
cleared (paid).

Open item management, A stipulation that the items in an account must be used to clear other line
items in the same account. Items must balance out to zero before they can be cleared. The account
balance is therefore always equal to the sum of the open items.

Fiscal Year, A period of usually 12 months, for which the entity produces financial statements and takes
inventory.

Open period, An open period in SAP is a period that is open for posting.

Closed period, An closed period in SAP is a period that is closed for posting.

5. POLICIES

5.1. Month-End Pre-closing steps

1. Parked and Saved as Complete FI documents shall be posted or deleted no later than the last
business day of the month. Parked and Saved as Complete documents include all invoices,
revenue documents, and journal entries. Note: Parked only FI documents can remain in parked
status at the end of the reporting period.

2. All Goods Receipt/Invoice Receipt (GR/IR) account balances shall be reviewed and account
maintenance steps performed at least weekly. Goods receipts and invoice receipts shall be
entered into SAP upon receipt.

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Government of Ras Al Khaimah

3. Assets & liabilities section personnel responsible for fixed assets acquired through capital
projects shall enter all fixed asset settlement rules into the SAP system by the last day of the
month. All settlement rules shall be maintained on a monthly basis to ensure proper settlement of
AUC assets to final, fixed asset general ledger accounts.

4. Department fixed asset additions, deletions, transfers, retirements and expenditure

reclassification entries shall be posted monthly by the last business day of the month. Monthly
confirmations shall also be performed and submitted to the concerned departments to ensure an
accurate fixed asset balance.

5. Balance sheet reconciliation must be performed to ensure completeness and accuracy of the
monthly management reports (MIS).

5.2. Month-End Closing steps.

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1. The month-end closing steps shall be executed and completed on or before the 3 business day
of the following month.

2. Accounting system users shall be notified that the posting period is closed and reports are
available for the month by the 5th business day of each month.

3. All posting periods shall remain closed after the monthly closing process is complete and the
period is closed. Accounting adjustments required after the period is closed shall be made in the
open, current period. Closed periods shall be re-opened only upon written request to and
approval by Finance Department.

4. Posting periods 13 through 16 will be open only for authorized accounting system user IDs.
Finance Department shall review and approve all SAP posting period authorizations for this
purpose before the basis team may grant authorization.

5.3. Month-End Post-closing steps.

1. The GR/IR account shall be reviewed for open items on purchase orders on at least a weekly
basis and by the last day of the month. Open items that are more than 30 days old shall be
resolved in the system by the last day of the following month.

2. Month-end closing transactions shall be validated by Finance Department by the 3rd business
day of the month.

3. Customer receivable account balances shall be aged and evaluated within government guidelines
to determine collectability and need for dunning letters to properly manage the accounts.

4. Cash clearing accounts shall be cleared and reconciled on a monthly basis. Line items more than
30 days old should be reviewed and steps taken to resolve.

5. Reconciling adjustments shall be posted in the current, open period. Posting periods shall not be
reopened for this purpose unless approved in advance and in writing by Finance Department.

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Government of Ras Al Khaimah

6. PROCESSES

6.1. Month-end Pre-closing processes

Activities that must be done before the posting period can be closed for the month.
1. Posting or clearing parked documents.
2. Posting all cost allocations for the posting period.
3. Posting all accrual and deferral accounting entries.
4. Creating settlement rules and final fixed asset settlement rules.

6.2. Month-end closing processes

Month end closing processes include activities necessary to complete monthly accounting entries to
fairly present the Government’s financial position and results of operations for the period.
1. Closing the posting period for the previous month in FI and CO modules.
2. Manual and automatic clearing of select, general ledger account line items.
3. Posting and reversing accrual accounting entries.
4. Posting reclassification and elimination entries to properly report internal activities and balance
sheet accounts.
5. Posting depreciation expenses.
6. Settling completed, capital projects in the AUC accounts to fixed assets.
7. Clearing cash balancing GL accounts upon receipt of the bank deposit slips.
8. Reclassifying the GR/IR account and posting accrued expenses for all non-valuated purchase
order line items.

6.3. Month-end Post-closing processes

1. Include activities necessary to validate the month-end closing steps, verify that all documents
posted appropriately, and reconcile FI account balances. Various reconciliations must be
performed monthly to ensure the validity of general ledger (GL) account balances in FI. (b)
 Reconciling the asset sub-module account balances to the respective fixed asset GL account
balances.
 Reconciling the Accounts Payable (AP) and Accounts Receivable (AR) subsidiary ledgers to
the respective GL account balances.
 Reconciling the SAP bank account balances with the actual bank balances (Bank Statements)
as at the end of the month.

2. Financial Accounting Records (FI Module) – The financial accounting records measure
revenues, expenses, the associated payables/liabilities, and receivables/assets on an accrual basis
of accounting. That is, expenditures/expenses are recognized when they are incurred and
revenues are recognized when earned or susceptible to accrual. Accounting transactions are
posted by general ledger account and fund, and one or more of the following cost objects: cost
center & internal order.

3. Parked and Saved as Complete FI documents – Invoices, revenue documents, and journal entries
that have been “Parked and Saved as Complete” but not posted in FI. These FI documents are
posted in FM as Value Type 60 documents and they consume budget even though the document
is not yet posted in FI or reflected in the GL account balance. Parked FI documents (not Parked
and Saved as Complete documents) do not post in FM; and therefore, do not consume budget.

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Government of Ras Al Khaimah

4. Posting periods – Twelve monthly posting periods exist in the Material Management (MM)
module (Procurement and Inventory), each period coinciding with a month of the Government’s
fiscal year. That is, posting period 1 is January 1-31 and period 12 is December 1-31. Only the
current posting period is open for this group of activities.

There are 16 posting periods in the FI, CO, and FM modules. The first 12 posting periods
represent the month of the government’s fiscal year, as defined herein for the MM module.
Periods 13 through 16 are special accounting periods used only by the Finance Department to
close the accounting records at the end of the fiscal year. Period 13 is used to post reconciling
adjustments before closing the fiscal year and carrying account balances forward. Period 14 is
used to adjust only the financial accounting records to post accruals, deferrals, eliminations, and
reclassifications, not posted on a monthly basis, to reflect Government’s financial position and
results of operations according to the International Public Sector Accounting Standards. Period
15 & 16 are used to post accounting adjustments resulting from the Government’s
Comprehensive Annual Financial Report (CAFR) audit.

7. PROCEDURES
1. Ensure that financial statements produced on a timely and accurate basis, within 5 working days
of the end of the reporting month.

2. Establish a checklist of month-end tasks that are performed by various departments and
monitored by the Finance Department (SAP Month-End Closing Checklist).

3. Finance Department is responsible for managing the month-end closing process.

8. PRE-CLOSING RESPONSIBILITIES.
The Finance Department is responsible for the following:
1. Maintain the opening and closing of all posting periods in the SAP system.

2. Notify departments and accounting users of the expected month-end closing date.

3. Develop and distribute month-end closing instructions.

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Government of Ras Al Khaimah

9. CLOSING CHECKLIST

Check box
Step to indicate Description Deadline Responsibility
completion
1 Open next month's posting period Day 1 Finance Manager
2 Last day to post Cash Receipts and Cash Clearing entries Day 1 AR Accountant
3 Post final A/P invoices Day 1 AP Accountant
4 Record Payroll entries Day 1 Payroll Accountant
5 Record the Monthly amortisation of prepaid expenses Day 1 GL Accountant
6 Record recurring entries (Interest, Private Allowances, Private Pension, Etc…) Day 1 Treasury Accountant
6 Settlement of AUC assets to main assets Day 1 Asset Accountant
7 Post parked documents that belong to the reporting month (GL, AP, AR,AA) Day 2 Accounting Manager
8 Execute recurring entries Day 2 Finance Manager
9 Post Accruals (Expenses, Assets & Liabilities, other than payroll accruals) Day 2 Accounting Manager
10 Post other adjusting entries Day 2 Accounting Manager
11 Run Monthly depreciation Day 2 Head of Assets & Liabilities
12 Revaluation of foreign currency open items Day 2 Finance Manager
13 Load last electronic bank statement (EBS) of reporting month Day 2 Head of Treasury
14 †Complete bank reconciliation Day 2 Head of Treasury
15 Maintain GR/IR clearing account Day 2 Accounting Manager
16 Balance sheet reconciliation Day 3 Accounting Manager & Finance Manager
17 Close the period. Day 3 Finance Manager
18 Inform all End-Users that reporting month is closed for FI postings Day 3 Accounting Manager
19 Reverse accruals in the new reporting period Day 3 Accounting Manager & Finance Manager
20 Inform Reporting & Budgeting Department to start preparing monthly management reports Day 3 Head of Accounting & Finance

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Government of Ras Al Khaimah

10. PROCESS MAP

Period End processes in SAP

To-Be Processes

Process Start

Physical Inventory in Verify the Post stock difference in

Stock Reconciliation
SAP excess/shortage in SAP SAP

The process has to be

Refer to
triggered manually.
asset
Depreciation Posting depreciation calculation
accounting
and posting will be
process
automated

This entry will be done Execute recuring entry

Recurring Entry
in th way of recurring on the basis of
Execution
entry settlement period

Accrual posting and

Enter Accruals Reverse Accruals
reversal
Month End

Refer to the
bank
Bank Reconciliation
reconciliation
process

Enter provisions for loss, Review and post

Provision
stock damages, etc.. provisions

Record the payroll

Review and post payroll
Payroll posting entries using the
entries
account AAM

Open items per vendor

Foreign currency Review and post
and customer will be
revaluation unrealized gain/loss
revaluated

Clearing of GR/IR
GR/IR reclassification account per completed
PO

Open/Close FI-MM
Open/close period
period

End

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