Perform general accounting: how the process runs, step by step

General accounting runs in a fixed order each period. The chart of accounts is set first, then entries, allocations and adjustments are posted, intercompany and ledger balances are reconciled, entities are consolidated, a trial balance is produced, and management adjustments are posted last. Accountants handle most steps; the controller approves.

The steps in order

1. Maintain the chart of accounts. The general ledger lead or a finance systems owner adds, retires and renames accounts, along with the attributes attached to them, such as cost centre, entity and reporting line. The controller approves any change. This happens before the period's postings begin, because a new account created halfway through leaves balances split across old and new codes.

1. Process journal entries. Staff accountants post activity that the subledgers do not carry on their own. Payables, receivables, payroll and fixed asset systems usually feed the ledger automatically, so the manual work is the remainder. Each manual journal goes to a reviewer, who checks the support and releases it. Preparer and approver should be different people.

1. Process allocations. A cost accountant or someone in planning spreads shared costs such as rent, IT and central services across departments or entities. The bases come from agreed drivers like headcount or floor space. Most systems run allocations as scheduled cycles, but someone still has to confirm the driver data is current before pressing go.

1. Process period end adjustments. Senior accountants book accruals for goods and services received but not yet invoiced, release prepayments, record depreciation and recognise revenue that has been earned but not billed. Then the period is closed to new postings in the subledgers.

1. Post and reconcile intercompany transactions. Accountants in each entity record their side of any trade, recharge or loan with a sister company. The two sides are then matched. Group accounting arbitrates when they disagree, which is often, since mismatches usually come from timing, currency or one entity simply not having booked the charge.

1. Reconcile general ledger accounts. Each balance sheet account has a named owner who proves its balance against something outside the ledger: a bank statement, a subledger report, a schedule, or the central treasury's record of cash where funds are held with one. Differences get explained or corrected. A reviewer signs off each reconciliation.

1. Perform consolidations and process eliminations. The group consolidation team pulls entity results together, translates foreign currency balances and removes intercompany sales, balances and investments so the group is not reporting business with itself. Any unmatched intercompany amount from step 5 surfaces here as a difference that will not eliminate cleanly.

1. Prepare the trial balance. The general ledger lead runs it at entity and group level. The controller reviews movements against the prior period and budget, and asks about anything that looks odd.

1. Prepare and post management adjustments. The controller or finance director books late corrections, reclassifications and judgement items, often as top side entries at group level. These need the strongest documentation of any journal, because they sit outside the normal posting flow and are the first place an auditor looks.

Where the order bends in practice

On paper the sequence is strict. In reality steps overlap. Reconciliation work often starts while late accruals are still arriving, and intercompany matching tends to run alongside the close and then get revisited.

The real risk sits at the handoffs. A subledger closed too early forces manual journals to cover the gap. An allocation run before the final adjustments spreads the wrong cost base. Management adjustments posted after reporting packs are drafted create versions that disagree.

Ownership also blurs. Small teams combine preparer and reviewer roles, which weakens segregation. Larger groups split work between shared service centres and local finance, and each side may assume the other is checking a given account.

Questions to ask the people who run it

What staff actually do often differs from the procedure document. These questions tend to expose the gap.

• Which journals are posted every period by hand, and why has nobody automated them?
• Who can create a new account, and how does anyone find out it exists?
• Which allocation drivers are refreshed before each run, and which are copied forward?
• When intercompany balances do not match, who decides which side is right?
• Are any accounts reconciled by rolling forward last period's explanation without fresh evidence?
• What gets booked after the trial balance has been reviewed, and who sees it?
• Which spreadsheets sit outside the system but feed numbers into it?
• If the person who does the consolidation were away, could anyone else run it?
• Where do recurring differences get parked, and how long have they been there?
• What would they stop doing tomorrow if they were allowed to?

The answers to the last question are usually the most useful. Experienced staff know which checks catch real errors and which exist only because someone added them after a problem years ago.

APQC's Process Classification Framework® (PCF) is an open standard developed by APQC, a nonprofit that promotes benchmarking and best practices worldwide. To download the full PCF or to view definitions and measures, please visit www.apqc.org/pcf.