- steps in the close
- 10
- VAT and TDS window after month end
- 25 days
- control accounts to agree
- 6
- owner for every step
- 1
Most Nepali businesses do not have a bookkeeping problem. They have a timing problem. Invoices are entered when someone has a free afternoon, the bank statement is looked at when the auditor asks for it, and the VAT return is prepared from whatever is on the screen on the 24th. The numbers are usually roughly right. The trouble is that "roughly right" cannot be defended when the tax office asks for a reconciliation, or when a bank asks for management accounts before a loan review.
A month-end close is the discipline that fixes this. It is a fixed list of checks, done in a fixed order, by named people, finished by a fixed working day. This article sets out what that list looks like for an owner-managed Nepali company, why each step matters, and where we think most businesses get it wrong.
What does a month-end close actually mean?
A close is the point at which you say: the books for this Nepali month are complete, agreed to evidence, and will not change without a recorded reason. It is not the same as filing. Filing is what you tell the Inland Revenue Department (IRD). Closing is what you can prove to yourself.
Three outcomes define a proper close:
Completeness. Every sale, purchase, receipt, payment and payroll item that belongs to the month is in the books, and nothing that belongs to the next month is.
Agreement. Each balance that can be checked against an outside document (bank, supplier, customer, tax portal) has been checked, with the difference explained.
Lock. The month is marked closed. Late entries go into the open month with a note, so that figures already used in a VAT or TDS filing do not quietly move.
The ten steps, in order
The order matters. Early steps feed later ones, so a mistake caught late costs a second pass.
| Step | What you do | Evidence you keep |
|---|---|---|
| 1 | Cut off sales and purchases at the month end | Last invoice numbers in and out |
| 2 | Post all remaining invoices, bills and expenses | Posted-versus-source count |
| 3 | Reconcile every bank account | Signed bank reconciliation |
| 4 | Count and agree petty cash | Cash count sheet |
| 5 | Agree receivables and payables to sub-ledgers | Ageing reports |
| 6 | Agree stock to the stock record | Stock summary |
| 7 | Reconcile VAT: sales book, purchase book, ledger | VAT working paper |
| 8 | Reconcile TDS: deducted, deposited, certificates | TDS working paper |
| 9 | Post accruals, prepayments and depreciation | Journal with a reason on each line |
| 10 | Review the month and lock it | Review note, sign-off, lock date |
Steps 1 and 2: cut-off and completeness
Cut-off is the quiet source of most monthly errors. Decide the last working day of the Nepali month, take the last sales invoice number and the last goods-received note, and write them down. Anything dated after that belongs to next month, even if the paperwork arrives early.
Then post everything that belongs to the month. A simple test: count the source documents (bills, invoices, vouchers) and count the entries posted. If the two numbers differ, the close is not ready to move on.
Step 3: reconcile every bank account
A bank reconciliation compares the cash book balance with the bank statement balance and lists every difference: cheques issued but not yet cleared, deposits in transit, bank charges not yet booked. The reconciliation should end with a difference of zero, or with a short list of items that each have a reason and a date they should clear.
Include every account: current accounts, foreign currency accounts, loan accounts and any digital wallet used for business. A forgotten wallet balance is a classic reason a year-end figure refuses to agree.
Step 4: petty cash
Count the cash in the box, add the vouchers, and compare the total with the imprest amount. Petty cash is small in value but large in what it tells an assessor about control. A box that is never counted invites questions about everything else.
Step 5: receivables and payables
Run the customer ageing and the supplier ageing, and agree each total to the ledger control account. For receivables, flag balances beyond your credit terms and decide, with the owner, which ones need a call this week. For payables, compare the larger supplier balances with the supplier's own statement.
Step 6: stock
If you hold stock, agree the quantity record to what is physically on the shelf for at least the highest-value lines each month, and a full count at least at year end. Stock is where unbilled sales, shortages and wastage hide, and Nepali tax assessments often start there. For the argument on how stock gaps are treated, see our note on stock shortage and unbilled sales.
Step 7: VAT reconciliation
Three figures must agree: the VAT shown in your sales book, the VAT shown in your purchase book, and the VAT balances in the ledger. Any difference needs an explanation before you file. Typical causes are an invoice posted in the wrong month, a credit note not recorded, or input VAT claimed on a purchase that does not qualify. For the filing mechanics and the 25-day rule, read VAT return filing in Nepal.
One point is worth stating plainly. An invoice sitting in the purchase book is not enough on its own to support an input credit. The payment route and the supplier's own records also matter, and the Supreme Court has dealt with this in more than one case. See input credit: an invoice is not enough.
Step 8: TDS reconciliation
List every payment on which tax should have been deducted at source (salaries, rent, contractor and service fees, interest and similar). For each, check three things: the correct rate was applied, the amount deducted was deposited within the window, and the payee will receive a certificate. The deducted amount in your ledger should equal the deposited amount plus anything still inside the deposit window. Current rates are in our guide to TDS rates for 2083/84.
Step 9: accruals, prepayments and depreciation
Record expenses that belong to the month but have not been billed (utilities, audit fees, interest), and spread prepaid items such as annual insurance across the months they cover. Post depreciation by the same method each month. Each journal needs a one-line reason. A journal with no reason is the first thing an assessor will ask about.
Step 10: review and lock
Someone other than the person who posted the entries should review a short set of figures: sales and gross margin against the previous month, the ten largest expenses, any account with an unusual balance, and the movement in cash. Write a three-line review note, sign it, and lock the month in the software, or in a register of closed months if you use spreadsheets.
A worked example (illustrative figures)
The figures below are invented to show the mechanics. They are not from any client.
A trading company finishes the month with these numbers:
Cash book balance at the bank: NPR 1,842,000
Bank statement balance: NPR 1,910,000
Cheques issued, not yet cleared: NPR 74,000
Bank charges not yet booked: NPR 6,000
The reconciliation reads: bank statement 1,910,000 less uncleared cheques 74,000 gives an adjusted bank balance of 1,836,000. The cash book shows 1,842,000, so the cash book is NPR 6,000 higher than the adjusted bank. The unbooked bank charges explain the whole gap. Post the NPR 6,000 charge, and the cash book becomes 1,836,000, which agrees to the adjusted bank figure. Difference: zero.
Now the VAT tie-out for the same month. Suppose the sales book shows output VAT of NPR 520,000 and the ledger output VAT account shows NPR 494,000. The gap of NPR 26,000 is not a rounding issue. Looking at the source documents, one large invoice was entered in the ledger at the pre-discount amount and a credit note was recorded only in the sales book. The fix is a ledger journal for the credit note, after which both show the same amount. Had the return been filed before this tie-out, the return and the ledger would have disagreed from day one.
Watch the calendar, not just the checklist
Nepal runs on the Bikram Sambat calendar, and statutory dates are counted from the end of the Nepali month. VAT returns and TDS deposits are commonly due within 25 days after the month ends, so a close that finishes on working day 8 or 10 leaves comfortable time to file. A close that finishes on the 24th leaves none. Confirm the current dates and any notice from the IRD before you rely on them, since filing rules and periods can change by notice.
Who does what
A close works when each step has one owner and one backup. In a small company that often means three roles:
Accounts staff: steps 1 to 6, and the working papers for 7 and 8.
Accountant or finance lead: steps 7 to 9, and review of the bank reconciliation.
Owner or director: step 10, and the decision on overdue receivables.
If one person does everything, you still need a second pair of eyes at step 10, even if it is an outside adviser looking at a monthly summary.
What goes wrong most often
Closing late and filing early. The return is prepared first and the books are tidied afterwards, so the two never agree.
Reconciling only the main bank account. The small account or wallet is where the unexplained balance sits.
Moving entries after a return is filed. If a closed month changes, the filed figures and the ledger drift apart without anyone noticing.
No evidence trail. The reconciliation exists on someone's laptop but is not saved with the month's papers.
Treating the close as an audit-time job. Year-end accounts become twelve months of repair instead of one month of review.
Our view
In our view, the most valuable change a Nepali owner can make is not new software. It is deciding the working day on which the books close, and holding to it. We would pick working day 7 or 8, write the ten steps on one page, and put a name beside each.
The practical answer is usually to start with the three steps that carry the most risk: the bank reconciliation, the VAT tie-out and the TDS tie-out. Do those properly for three months in a row, and the rest of the checklist tends to follow, because errors surface while they are still small.
We would also separate "closed" from "filed" in the calendar. Close by working day 8, review by day 10, file by day 15. The statutory limit then becomes a safety margin rather than a deadline you are racing. This is our judgement from how monthly accounts tend to behave, not a requirement of the law.
Where we would push back is on the habit of leaving reconciliations to year end because "the auditor will find it." Audit support, as we do it, helps you prepare the records an auditor will ask for. It is not a substitute for keeping them.
Frequently asked questions
How long should a month-end close take?
For a small or mid-sized Nepali company with one or two bank accounts, a close of around five to eight working days is a sensible target once the routine is in place. Larger groups with stock and several branches take longer. The goal is a fixed, repeatable day rather than speed.
Do I need accounting software to close properly?
No. The checks work in spreadsheets, but software makes the lock and the audit trail easier. If you compare options, see our comparison of Tally, Zoho Books and QuickBooks for Nepal.
What if a bank reconciliation will not agree?
Do not force it with a balancing entry. List the unexplained difference, trace it to the month it started, and correct the cause. A suspense balance that is never cleared is worse than an open difference with a note.
Can I close the month before the supplier bills arrive?
Yes, with an accrual for the expense you know belongs to the month. Record it with a reason, and reverse it when the bill arrives.
Does a clean close help with a bank loan?
Banks usually ask for recent management accounts and bank statements. Books that are closed and reconciled each month are far easier to present than figures assembled when the request arrives. See our guide to bank loan documentation.
What happens if I change a closed month?
Post the correction in the current open month with a clear note, unless the change affects a return already filed, in which case discuss the right way to amend it with your adviser first.
Where we can help
If your month-end is still a scramble, our bookkeeping services set up the ten-step routine, run the reconciliations alongside your team, and hand you a monthly pack you can show a bank or tax officer. For the year-end side, see audit support services in Nepal.
General information only, not advice.
