Closing the fiscal year is a task generally performed after your auditor has received your trial balance, and perhaps after they’ve returned adjustments. There’s no requirement that the fiscal year be closed at a specific time, but once it’s done, you can’t reopen it or adjust the accounting periods.
Follow these steps to close the fiscal year.
- Using the universal search function, search “accounting periods.”
- Select the accounting period and click the tick box for “close year.” When prompted, choose “yes” to confirm your selection.
- Next, you want to check your regular chart of accounts. Look at your journal entries to see what has actually been done in the system. Business Central allows you to use many different approaches to post into sub-ledgers that then go into the general ledger. Use filters to see your revenue and adjustments for the year. Example:
- Filter for any entry with a balance other than zero.
- Use a date filter to select the period you’re considering.
- Use “as of” to create a net change column.
- Close your revenues, reverse your revenues, reverse your expenses, and that’s the last part of the fiscal year end process.
Close Income Statement
Once the fiscal year has been closed, you are ready to generate a year-end closing entry using the Close Income Statement Option. Follow these steps:
- Use the universal search function and type “Close Income Statement” and select the correct link.
- Several fields must be filled in:
- Fiscal year ending date
- General journal template
- General journal batch
- Balancing account number
- Document number (this field is automatically populated, or you can manually enter a number)
- Net profit account number
- Net loss account number
- Posting description (default is Close Income Statement; enter a description)
- Business unit code (select if you require an entry for each business unit code)
- Dimensions (Select if you require an entry for each dimension used in the general ledger account)
- Inventory period closed (this depends on whether your inventory and accounting periods are the same)
- Choose the OK button.
Post the Year-End Closing Entry
At this point, you’re ready to post the year-end closing entry. Follow these steps:
- Use the universal search function and type “general journals.” Choose the correct link.
- Find the batch that contains the closing entries.
- Add the necessary entries to the journals.
- Click Post.
A note about accounting periods
Business Central allows you to have any number of accounting periods. Most organizations use monthly accounting periods. But you can add an “nth” period, which is a hidden, 13th period that takes into account the closing information.
At least one fiscal year must always be open, so before closing the previous year, you must have created a new year.
To learn more, contact us today!