01
The Monthly Cycle
The Monthly Accounting Cycle
The same six steps repeat every month for a foreign-invested company operating in China. Who performs each step varies. The order rarely does. This is a workflow explanation, not a description of a service package.
- 01Prepare the month’s records
- 02Review documents and bank activity
- 03Record and reconcile
- 04Clarify missing items
- 05Prepare applicable returns
- 06Close the month
The company gathers sales and purchase documents, bank statements and supporting records. The accountant checks each document for completeness and matches it against bank activity. Transactions are classified into accounts and reconciled across bank, invoice and contract records. Gaps are listed and clarified. Where a recurring return applies, it is prepared from those reconciled records and filed. Filing status and open items are then recorded, and the file is readied for the next period.
02
Records to Prepare Each Month
The company side of the cycle is internal preparation. A typical month for a foreign-invested company includes the records below. Payroll figures belong in the same handoff when the company has employees. Tax notices and prior filing confirmations belong when they affect the period.
- Sales invoices and fapiao issued during the month
- Supplier invoices received, with expense documents
- Bank statements for every company account
- Contracts and payment notes for unusual or large payments
- Payroll and social insurance data, where the company has employees
- Tax filing confirmations and prior filing records, where relevant
03
How Bookkeeping and Reconciliation Work
Bookkeeping classifies each transaction into the right account and keeps the ledgers for the period. Reconciliation then compares the company’s records against each other: bank activity against invoices and fapiao, and both against contracts and payment notes.
Bank statements and fapiao record the same activity from two sides. Comparing them shows unpaid or unrecorded items before any return is prepared. An invoice with no matching payment, or a payment with no invoice, becomes an open item that has to be traced.
Missing or inconsistent documents are listed and clarified with the company before the month’s work is completed. Items that cannot be resolved that month are carried forward as unresolved rather than assumed. That carry-forward is what keeps the books honest when the file is incomplete.
04
The Monthly Handoff
The cycle depends on a clear handoff in both directions. The company sends the month’s records by an agreed date. The accountant returns a short list of open items and, once the work is done, the filing status for the month.
The company prepares
- Sends records on the agreed date
- Answers open-item questions
- Confirms unusual transactions
- Shares payroll data with the accounting file
The accountant returns
- Reviewed and recorded documents
- Reconciled bank, invoice and contract items
- A list of gaps still open
- Filing status for the month
When answers arrive late, the affected items move to the next cycle. An agreed date and a single point of contact on each side are what keep the month predictable. This is an internal operating habit. It is not a fee schedule and not a list of deliverables from a service engagement.
05
How Tax Filing Fits Into the Monthly Cycle
Monthly accounting often feeds the recurring tax filings that apply to a company. Which returns apply, and how often, depends on the company’s filing profile and tax registration. Scope differs from one company to the next. Returns are prepared from the reconciled records, which is why reconciliation comes first.
This guide stays at workflow level. It does not teach how to issue, collect or correct a fapiao, and it does not teach VAT periods, output and input VAT, or return submission. Those subjects have their own guides.
For how fapiao work, read the China fapiao guide. For how VAT filing works, read China VAT filing explained. Detailed fapiao operations, as distinct from the monthly books, are a separate workflow covered by VAT and fapiao support.
06
What Happens at Month-End
Once the records are reviewed and the applicable filing work is done, the cycle ends with a visible close, not with a promise that every open item has disappeared.
- Reconciled records for the period
- A list of unresolved items, where any remain
- The filing status for the month
- Records organized for the next reporting period
Not every open item is closed in the same month. What matters is that each one is visible and carried into the next cycle. Timing depends on when records and answers arrive. An incomplete month should not be treated as closed merely because a calendar date has passed.
07
Common Monthly Accounting Mistakes
These are preparation failures inside the company, not a catalogue of service add-ons. Each one leaves the accountant working from an incomplete file.
No monthly document routine
Records arrive irregularly, so gaps surface only at filing time.
Fapiao and bank receipts do not match
An invoice with no matching payment, or a payment with no invoice, has to be traced before the period can be relied on.
Payroll data is not shared with accounting
Payroll and social insurance figures kept outside the accounting process leave the records incomplete. Where the company has employees, that data is part of the monthly handoff, not a separate year-end surprise. Ongoing payroll operations themselves are covered by payroll and social insurance.
The bank account opens late
Until the company account is open, early payments and receipts can be handled outside it. The first months are then harder to reconcile.
Annual work starts from incomplete books
Year-end preparation built on months of unresolved items takes longer and is harder to complete accurately. The annual calendar is a different guide: the China annual compliance checklist.
08
What This Guide Does Not Cover
General monthly accounting covers the books, reconciliation, the recurring filings that sit on those books, and month-end close. It is the educational map of that cycle for a foreign-invested company.
Detailed fapiao operations and the VAT return itself stay on their own guides, linked above. Annual reporting, foreign-investment annual information and annual enterprise income-tax reconciliation are not monthly steps.
If you would rather have the monthly cycle run for you, see Accounting and Tax Compliance — it sets out the scope, the monthly deliverables and how the quote is set.
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