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★ Cut-Off - Basic Principles

Presentation

The term "cut-off" corresponds to the closing of accounts. By definition and by extension, the notion of cut-off corresponds to the procedures used by the companies at the close of the accounts and which make it possible to reliably and consistently allocate to each financial year transactions whose execution is close to the date closing (we should normally talk about "cut off procedures").

The cut-off follows directly from the application of one of the accounting principles that constitutes the principle of independence of financial years: the products as well as the expenses incurred by an enterprise must be related to the accounting year concerned. It allows to respect the faithful image of the accounts, obligation prescribed by the PCG.

The cut off includes all operations aimed at closing the accounts of a company and aiming to respect the principle of faithful image.

Consequences

The cut-off entails a large number of adjustments in accounting and mainly adjustments to certain balance sheet and income statement items. On this occasion, accounting entries must be recorded in a specific journal (a log of various transactions or an inventory transaction log).

Here are the most common adjustments in practice:

  • Regularization of goods already delivered or services already performed but not yet billed to customers (invoices to be established) or from suppliers (invoices not received);
  • Adjustments of expenses billed in advance and for a period extending beyond the accounting year (prepaid expenses) or revenue (deferred revenue);
  • Adjustments of expenses already incurred at the close of the financial year but whose amount or maturity involves a slight uncertainty (accrued charges) or acquired products whose amount is slightly uncertain (receivables).

How does it work

Correct the amount invoiced

Manually correct the amount invoiced at the level of each contract / project. This correction of turnover billed will be taken into account in the reports. Learn more.

Correct the amount produced

Manually correct the amount produced at the level of each contract / project. Learn more.