Rollforwards in Accounting: How to Explain Balance Changes

A rollforward is an accounting method that explains how an account balance changes from one period to the next by starting with the beginning balance, applying all transactions and adjustments during the period, and reconciling to the ending balance.

What is a rollforward in accounting?

A rollforward is how accountants explain what changed in an account over time.

Rollforward formula:

Beginning balance

± Period activity (transactions, accruals, adjustments)

= Ending balance

You start with where an account stood at the beginning of a period, layer in everything that happened during the period, and land at the ending balance. 

Rollforwards show up everywhere: fixed assets, investments, inventory, prepaid expenses, deferred revenue. Anywhere balances don’t just reset to zero each month, you’re probably using one.

Rollforwards are foundational to close, audit readiness, and financial review.

Plain-English Definition of Rollforward

A rollforward is an accounting method used to reconcile an account from one period to the next.

It takes:

• the opening balance

• plus or minus activity during the period (transactions, accruals, adjustments)

• and reconciles to the closing balance

The result is a clear bridge from “last month” to “this month,” with every movement explained.

How Rollforwards Show Up in Non-Profits

Let’s start with non-profits. In non-profits, accountants need to do rollforwards on net assets and grant revenue. 

Net assets by restriction

Non-profits routinely roll forward net assets:

• Beginning net assets (with donor restrictions)

• Plus new restricted donations

• Less amounts released for program use

• Ending restricted balance

Deferred grant revenue

When grant funds are received upfront but recognized over time:

• Beginning deferred revenue

• Plus new grant receipts

• Less revenue recognized during the period

• Ending deferred balance

Why do these matter? Net assets by restrictions tie donor intent directly to financial reporting. For deferred revenue, the rollforward is the proof that revenue recognition aligns with grant terms, not just cash receipts.

How Rollforwards Work in Family Offices

Let’s look at family offices next. Brokerage statements from multiple custodian accounts are amongst the most common rollforwards. 

Investment account rollforwards

For brokerage or alternative investment accounts:

• Beginning market value

• Plus contributions

• Plus income and gains

• Less withdrawals

• Ending market value

Capital account rollforwards

For private equity or fund investments:

• Beginning capital balance

• Plus capital calls

• Plus allocated income

• Less distributions

• Ending capital balance

These rollforwards tie custodian statements back to the general ledger. This is how accountants can explain why the GL balance matches (or doesn’t match) a K-1 or capital statement. 

Why Rollforwards Matter

Tactically, rollforwards explain how an account balance changes from one period to the next. Culturally, rollforwards build trust in the numbers. 

To accountants, rollforwards reduce “plug” entries and last-minute fixes. 

To managers, rollforwards make changes in balance explainable. 

To auditors, rollforwards provide a clear audit trail.

For non-profits, rollforwards protect donor trust. 

For family offices, rollforwards preserve confidence across complex investment

At the end of the day, a rollforward answers the most important question in accounting:

“Why does this number look the way it does?”

If you’re a non-profit or a family office dealing with repetitive rollforwards, come talk to us. Let us show you how AI could simplify this tedious task.

Rollforward FAQ

What is a rollforward in accounting?

A rollforward is an accounting method that explains how an account balance changes from one period to the next by starting with the beginning balance, applying all activity during the period, and reconciling to the ending balance.

How does a rollforward work?

A rollforward works by taking the prior period’s ending balance, adding or subtracting transactions, accruals, and adjustments that occurred during the current period, and arriving at the current period’s ending balance. In practice, this is usually documented in a schedule or workpaper that clearly shows each movement in the account.

What accounts typically require rollforwards?

Rollforwards are most commonly used for balance sheet accounts that persist across periods, including:

• Fixed assets and accumulated depreciation

• Investments and brokerage accounts

• Deferred revenue or deferred grant revenue

• Prepaid expenses

• Net assets with donor restrictions (non-profits)

• Capital accounts (family offices and investment entities)

How are rollforwards used in non-profits?

Non-profits use rollforwards to track how restricted and unrestricted balances change over time. Common examples include rolling forward net assets with donor restrictions as funds are received and released and rolling forward deferred grant revenue as revenue is recognized in accordance with grant terms. These rollforwards are critical for audit support, board reporting, and demonstrating compliance with donor intent.

How are rollforwards used in family offices?

Family offices rely on rollforwards to reconcile complex investment activity. Typical use cases include: rolling forward brokerage account balances using contributions, withdrawals, income, and gains, and rolling forward private investment capital accounts using capital calls, allocations, and distributions. Rollforwards help tie custodian statements, K-1s, and investment reports back to the general ledger.

What is the difference between a rollforward and a reconciliation?

A rollforward explains how an account balance changed over time. A reconciliation verifies that the ending balance is correct by comparing it to an external source, such as a bank statement, custodian report, or subledger. In a strong close process, rollforwards and reconciliations work together.

Are rollforwards required for audits?

Rollforwards are not always explicitly required, but auditors frequently rely on them to understand balance changes, test completeness, and identify unusual activity. Well-prepared rollforwards reduce audit questions, back-and-forth, and last-minute adjustments.

How often should rollforwards be prepared?

Rollforwards are typically prepared monthly as part of the close, but some accounts may be rolled forward quarterly or annually depending on materiality and complexity. For organizations with complex funding or investment structures, monthly rollforwards are best practice.

Why do rollforwards break during close?

Rollforwards usually break when source documents arrive late (PDFs, statements, emails), manual adjustments aren’t documented, and activity lives outside the ERP. This is why rollforwards often become the most time-consuming part of close.

How do rollforwards relate to workpapers?

A rollforward is one of the most common types of accounting workpapers. It provides the documented logic behind a balance and serves as the bridge between raw source data and the journal entries posted to the general ledger.