Xero Month-End Journal Entries: A Finance Team Checklist

Even in Xero — where bank feeds and invoice matching handle much of the daily bookkeeping — month-end still requires a set of manual journal entries. These entries are what turn your cash-basis bank data into proper accrual-basis financial statements. Missing even one can materially misstate your P&L or balance sheet.

The Standard Month-End Journal Entry List

1. Prepayment Amortization

For every prepaid expense on your balance sheet, you need a journal entry that debits the relevant expense account and credits the prepaid asset account by the monthly amortization amount. This is typically the largest category of month-end journals for finance teams with multiple annual contracts.

2. Accrued Expenses

For any invoice not yet received but expense already incurred, debit the expense account and credit "Accrued Expenses". Common items: professional fees, utilities, contractor hours, and any bonuses earned but not yet paid.

3. Accrual Reversals

For each accrual posted in the prior month, post the reversal on the first day of the current month. In Xero, use the built-in "Reverse" button on the original journal. Then code the actual invoice as normal when it arrives.

4. Depreciation

Xero has a fixed asset register with built-in depreciation calculation. Run the depreciation from Accounting > Fixed Assets > Run Depreciation. This posts the depreciation journal automatically — but you should verify the amounts are correct before running.

5. Payroll Journals

If you use payroll software that does not integrate directly with Xero, you will need to post a manual payroll journal. This typically debits gross wages, employer NI, and pension contributions to the relevant expense accounts, and credits the payroll clearing, PAYE liability, and pension liability accounts.

6. Deferred Revenue

If your business receives payment in advance for services not yet delivered, you need a journal to move the revenue from a "Deferred Revenue" liability account to the income account as performance obligations are met.

Common Mistakes at Month-End

• Posting journals to the wrong period — always check the journal date before saving
• Forgetting to reverse prior-month accruals — leads to double-counting expenses
• Amortizing the wrong monthly amount — recalculate after any early terminations or adjustments
• Running depreciation twice — Xero does not prevent this; check the fixed asset register first
• Missing new prepayments — any bill coded to a prepaid account in the current month needs to be on your amortization schedule

Staying on Top of It With a Checklist

The best way to ensure nothing is missed is to maintain a month-end close checklist with every journal entry as a separate task. Each task should reference the Xero account codes and the expected amounts so that any team member can perform the close if your usual accountant is unavailable.