Closing the Year for General Ledger

You perform the Year End Closing function at the end of the company's fiscal year, but it can be performed at anytime by specifying the fiscal start and end date without regard to the defined accounting periods. The fiscal year and subsequent periods are defined and closed on the Accounting Periods form.

Before running this function, verify that all outstanding journal transactions for the fiscal year are entered and posted to the ledger. This function generates journal transactions which set all revenue and expense account balances to zero. If all journal transactions are not posted to the ledger, the transactions created may not actually set all revenue and expense account balances to zero.

Only one user at a time can have the ledger open. Therefore, if someone is running a financial report or performing year end closing, this function cannot be performed until the original process is complete.

Caution:

This procedure creates debit and credit entries to close out all revenue and expense accounts for the date range specified. These entries are placed in the General Journal. You must then post the General Journal to the General Ledger.

Note:

This procedure should be run only after all entries made to the fiscal year are posted.
To close the journal, it must be a writable journal.

To close the year for the General Ledger:

On the Year End Closing Journal Entries form, select the general journal to close.
In the Income Summary Account field, select the "Retained Earnings" account for the year end closing transaction. The account's type must be set up in the Chart of Accounts as Owner's Equity.
(Optional) Change the Fiscal Year Start Date and Fiscal Year End Date.
To have the system first delete all journal entries for this journal before generating the year-end transactions, select the Delete Current Journal Entries check box.

This refers to the existing entries in the General Journal only. Do not change any of the references generated by the system on the entries in the General Journal. If this check box is selected, all journal transactions along with any associated text are deleted when the transactions are generated, prior to creating the closing transactions.
To have the system clear the unit code balances in the revenue and expense accounts as well, select the Unit Code Detail check box.

Clearing this check box leaves the balances in the unit codes and carries them forward.
Click Process.

Note: You can close fiscal years an unlimited number of times. If you have closed the fiscal year and need to enter transactions for that year, you can post the transactions and then run the year-end close again.

Suppose the following entries were the financial activity for a company for the fiscal year of January 1 to December 31 using the following accounts:


Account	Description
10000	Assets
20000	Liabilities
30000	Owner's equity
40000	Revenue
50000	Expense

Example of Ending Balances on December 31:


Account	Balance
10000	100,000.00
20000	(64,500.00)
30000	(20,000.00)
40000	(23,500.00)
50000	8,000.00

Example of Year End Entries:


Account	Balance
30000	15,500.00
40000	23,500.00
50000	(8,000.00)

Example of Ending Balance on December 31 after Year End Balance:


Account	Balance
10000	100,000.00
20000	(64,500.00)
30000	(35,500.00)
40000	00
50000	00

No entries were generated for Accounts Receivable of Cash, because they are asset accounts. Only revenue and expense accounts are closed out.