Finance Accounting

<!-- AUTO-GENERATED by export-skills.py — DO NOT EDIT -->
---
name: finance-accounting
description: Create journal entries, perform account reconciliation, run variance analysis, and manage financial close processes. Use when recording transactions, reconciling accounts, analyzing budget variances, or executing month-end close procedures.
---

# Finance & Accounting Operations

Operational accounting framework for journal entries, reconciliation, variance analysis, and financial close. This skill covers the day-to-day accounting operations — not strategic financial planning (which is the CFO agent's domain).

## Use this skill when

- Recording transactions as journal entries (accruals, prepayments, depreciation)
- Performing bank, intercompany, or subledger-to-GL reconciliation
- Analyzing budget vs. actual variances with root cause decomposition
- Executing or designing month-end / quarter-end close processes
- Preparing financial statement review checklists
- Building close calendars and sign-off workflows

## Do not use this skill when

- Optimizing cloud infrastructure costs (use `cost-optimization`)
- Building startup financial projections or models (use `startup-financial-modeling`)
- Making strategic capital allocation decisions (use CFO agent directly)
- Conducting investor-facing financial analysis (use `startup-business-analyst-financial-projections`)

## Instructions

1. **Identify the accounting task** — journal entry, reconciliation, variance analysis, or close process.
2. **Apply the appropriate template** from the sections below.
3. **Follow the verification steps** — every entry needs supporting documentation.
4. **For close processes** — use the Month-End Close Checklist with day-by-day sequencing.

---

## Journal Entry Templates

### Standard Entry Structure

```
Date: [YYYY-MM-DD]
Entry #: [JE-XXXX]
Prepared by: [Name]
Approved by: [Name]
Description: [Clear description of transaction]

| Account Code | Account Name | Debit ($) | Credit ($) |
|-------------|-------------|-----------|------------|
| XXXX-XX | [Account] | X,XXX.XX | |
| XXXX-XX | [Account] | | X,XXX.XX |
| **Total** | | **X,XXX.XX** | **X,XXX.XX** |

Supporting documentation: [Reference #, invoice, contract, etc.]
```

### Common Entry Types

| Type | Debit | Credit | Frequency | Notes |
|------|-------|--------|-----------|-------|
| **Revenue Recognition** | Deferred Revenue | Revenue | Monthly/per performance obligation | ASC 606 five-step model |
| **Accrued Expense** | Expense | Accrued Liabilities | Month-end | Reverse next period |
| **Prepaid Expense** | Prepaid Asset | Cash/AP | At payment | Amortize over benefit period |
| **Depreciation** | Depreciation Expense | Accumulated Depreciation | Monthly | Per asset schedule |
| **Payroll Accrual** | Salary Expense | Accrued Payroll | Per pay period | Include benefits, taxes |
| **Bad Debt** | Bad Debt Expense | Allowance for Doubtful Accounts | Quarterly | % of AR aging |
| **Intercompany** | IC Receivable (Entity A) | IC Payable (Entity B) | As incurred | Must net to zero |

---

## Account Reconciliation Process

### Reconciliation Workflow

| Step | Action | Output |
|------|--------|--------|
| 1 | Pull system balances (GL, bank, subledger) | Raw data extract |
| 2 | Match transactions (automated where possible) | Matched items list |
| 3 | Identify unmatched items | Exception list |
| 4 | Investigate exceptions | Root cause for each |
| 5 | Book adjusting entries if needed | JE references |
| 6 | Document and sign off | Reconciliation worksheet |

### Reconciliation Worksheet Template

```markdown
## Account Reconciliation — [Account Name] — [Period]

**Account #:** [XXXX-XX]
**Preparer:** [Name] | **Reviewer:** [Name]
**GL Balance:** $[X] | **Source Balance:** $[X]

### Reconciling Items
| # | Description | Amount | Status | Age (days) |
|---|-------------|--------|--------|------------|
| 1 | | $ | Open/Resolved | |
| 2 | | $ | Open/Resolved | |

**Adjusted GL Balance:** $[X]
**Adjusted Source Balance:** $[X]
**Difference:** $[X] (must be $0 or within threshold)

### Sign-off
- [ ] Preparer: [Name] — [Date]
- [ ] Reviewer: [Name] — [Date]
```

### Reconciliation Types

| Type | GL Account vs. | Frequency | Common Issues |
|------|---------------|-----------|---------------|
| **Bank Reconciliation** | Bank statement | Monthly | Outstanding checks, deposits in transit |
| **Intercompany** | Counterparty entity GL | Monthly | Timing differences, FX |
| **Subledger-to-GL** | AR/AP subledger | Monthly | Posting lag, unprocessed invoices |
| **Suspense Account** | $0 target | Weekly | Unclassified transactions |
| **Fixed Assets** | Asset register | Quarterly | Disposals not recorded |

---

## Variance Analysis Framework

### Budget vs. Actual Analysis

```markdown
## Variance Report — [Period]

| Line Item | Budget | Actual | Variance ($) | Variance (%) | Favorable? | Root Cause |
|-----------|--------|--------|-------------|-------------|------------|------------|
| Revenue | | | | | | |
| COGS | | | | | | |
| Gross Profit | | | | | | |
| OpEx — S&M | | | | | | |
| OpEx — R&D | | | | | | |
| OpEx — G&A | | | | | | |
| EBITDA | | | | | | |
```

### Price / Volume / Mix Decomposition

For revenue or COGS variances, decompose into three components:

| Component | Formula | Interpretation |
|-----------|---------|---------------|
| **Price Variance** | (Actual Price - Budget Price) x Actual Volume | Did we charge more/less than planned? |
| **Volume Variance** | (Actual Volume - Budget Volume) x Budget Price | Did we sell more/less than planned? |
| **Mix Variance** | Residual (Total - Price - Volume) | Did the product/customer mix shift? |

### Materiality Thresholds

| Variance Size | Action Required |
|--------------|-----------------|
| <5% and <$10K | Note only — no investigation needed |
| 5-10% or $10-50K | Brief explanation in variance commentary |
| 10-20% or $50-100K | Detailed root cause analysis |
| >20% or >$100K | Management review and corrective action plan |

---

## Month-End Close Checklist

### Close Calendar (5-Day Close Target)

| Day | Activities | Owner | Status |
|-----|-----------|-------|--------|
| **Day 1** | Cutoff: close AP/AR sub-ledgers, post final revenue entries | Accounting | |
| **Day 1** | Bank reconciliation for all accounts | Treasury | |
| **Day 2** | Accruals: payroll, benefits, utilities, professional fees | Accounting | |
| **Day 2** | Intercompany reconciliation and netting | Accounting | |
| **Day 3** | Depreciation/amortization entries | Accounting | |
| **Day 3** | Prepaids and deferred revenue amortization | Accounting | |
| **Day 3** | Inventory valuation adjustments (if applicable) | Operations | |
| **Day 4** | Variance analysis (budget vs. actual) | FP&A | |
| **Day 4** | Financial statement draft (BS, IS, CF) | Controller | |
| **Day 4** | Flux analysis — flag items >10% or >$50K movement | Controller | |
| **Day 5** | Management review and sign-off | CFO | |
| **Day 5** | Final adjustments and close period in ERP | Controller | |

### Revenue Recognition (ASC 606 — 5-Step Summary)

| Step | Question | Output |
|------|----------|--------|
| 1. Identify contract | Is there an enforceable agreement? | Contract list |
| 2. Identify obligations | What distinct goods/services are promised? | Performance obligation list |
| 3. Determine price | What is the transaction price? | Price allocation |
| 4. Allocate price | How is price allocated to each obligation? | Standalone selling prices |
| 5. Recognize revenue | When is each obligation satisfied? | Revenue schedule |

---

## Financial Statement Review Checklist

| Check | Description | Status |
|-------|-------------|--------|
| **Balance Sheet** | Assets = Liabilities + Equity | |
| **Trial Balance** | Debits = Credits | |
| **Cash Reconciliation** | Cash per GL = Cash per bank (after reconciling items) | |
| **Revenue Reasonableness** | Compare to prior period, budget, and run-rate | |
| **Expense Reasonableness** | No unusual spikes or drops vs. prior period | |
| **Intercompany Elimination** | IC balances net to zero in consolidation | |
| **Deferred Revenue** | Matches contract schedules | |
| **AR Aging** | No unexpected increase in 90+ day buckets | |
| **AP Aging** | No past-due items without explanation | |

---

## Common Mistakes

- **Posting to wrong periods** — ensure cutoff dates are strictly enforced; late entries distort month-over-month comparisons
- **Failing to reverse accruals** — accruals booked in period N must be reversed in period N+1 to avoid double-counting
- **Reconciliation without investigation** — clearing reconciling items without understanding root cause hides errors
- **Ignoring materiality thresholds** — investigating every $50 variance wastes time; focus on material items
- **Manual spreadsheet-based close** — error-prone and not auditable; use ERP close management tools where possible
- **Revenue recognition shortcuts** — ASC 606 requires analysis per contract; don't apply blanket recognition policies

---

## Additional Resources

- Related skills: `cost-optimization` (cloud cost management), `startup-financial-modeling` (early-stage projections)
- FASB ASC 606 — Revenue from Contracts with Customers
- Close management best practices (BlackLine, FloQast methodologies)

<!-- Source: .faos/custom/skills/business/finance-accounting/SKILL.md -->