Woman with restaurant general ledgerSuccessfully closing out a period can start the domino effect for proactively operating a restaurant versus missed opportunities for the following periods. The purpose of the Period End Financial Close is to verify accuracy so you can understand where your money is going. This enables you to make quicker, more educated business decisions. When Closing out the period, it should start with a review of the financial statements; The Profit & Loss Statement, The Balance Sheet, and The Cash Flow Statement. Within each statement, there are even more defined areas of focus that should pop out to an operator as a must-watch, for success. In this post we discuss a key account to focus on when conducting a Period End Financial Close: Due To/From Accounts.

Closing Out Due To/From Accounts

Due To/From Accounts are essentially an intercompany transfer GL. Operators use them to track money due to or from another entity. It shows the true value of your business when reviewing the Balance Sheet. These accounts can get out of balance if you do not properly audit and track them.

  • If the balance is negative on the Balance Sheet, it reflects money you are owed
  • If the balance is positive on the Balance Sheet, it reflects money that you owe
  • Each unit should reflect the same balance, one positive and one negative



What causes Due To/From To Reflect An Incorrect Balance?

  • The initial borrowing entry is not recorded. However, the deposit is recorded
  • The deposit is not recorded, but coded to the incorrect account
  • The GL is not used properly when coding expenses or paying back the money

How Can You Correct Due/To From Being Out Of Balance?

If Due/To From Accounts do not match from the entity owed (negative) to the entity who owes (positive):

  • Run a side-by-side Balance Sheet for the two units
  • Review the Trial Balance for each location to determine where the entries do not match
  • Determine which balance is accurate and where the incorrect coding needs to be classed
  • Send a message to your Accountant with the needed adjustments

RASI Due To/From chart

Best Practice to closing out Due/To From Accounts

  • When reviewing Due To/From Accounts, review the side-by-side financials on a weekly basis
    • This allows you to verify that the accounts balance one negative and one positive
    • Additionally, this helps to mitigate timely research at Period End
    • Furthermore, it ensures that your financials are accurate so you can forecast and goal-set in order to expand the financial health of your business.

RASI Due To/From Accounts graphic