Cut-Off
Also called: cut-off date, accounting cut-off
What is Cut-Off?
Cut-off is the rule that a transaction is recorded in the period in which it actually occurred, not the period in which the paperwork arrived or the money moved.
Why cut-off errors matter
Cut-off errors are the most common reason two consecutive months look strange. A March supplier bill posted in April makes March look profitable and April look bad, while the year total is unchanged. Anyone comparing months is then comparing noise.
How to get cut-off right
Under accrual accounting the test is when goods were received or the service was performed — evidenced by the goods receipt note or delivery date, not the invoice date or the payment date. At each month-end close, list the bills you expect but have not received and accrue for them rather than letting them slide into next month.
Frequently asked questions
Recording a transaction in the wrong period — typically a purchase bill posted when it arrived rather than when the goods were received.