Record Profit/Loss for the Year

This procedure is used to automatically record the year-end profit or loss. The outcome closes the income statement against the balance sheet at the end of the year.

It can also be used to create a proposal for recording the year-end result without updating the general ledger.

Before You Start

  • All transactions from the year to be updated are recorded.
  • FAM function GL99 is defined in ‘FAM Function. Open’ (CRS405).

Follow These Steps

  1. Start ‘General Ledger. Calculate Profit/Loss’ (GLS995/E).

  2. Enter accounting year and select whether to update the general ledger.

  3. If you wish to close the profit and loss accounts at year-end, select the ‘Year-end, profit and loss calculation’ check box (see Example 1).

  4. If you wish to close the balance accounts at year-end and have them reopened automatically, select the ‘Close/open balance sheet accounts’ check box (see Example 2).

  5. For the profit and loss calculation, select calculation method:

    • Method 1 involves closing each profit and loss account against a balance account for the year’s profit/loss. In this way the profit and loss accounts end the year with a zero balance.
    • Method 2 involves offsetting the total from all profit and loss accounts against an income account for the year’s profit/loss which is then offset against an account on the balance sheet for the year’s profit/loss. In this way, the profit and loss accounts retain their balance.

  6. Enter the balance account to which the year-end profits are posted as well as the profit and loss account used for posting the year’s profit.

  7. Enter a voucher text. Press Enter to confirm.

Example 1: Close Profit and Loss Accounts at Year-End

All profit and loss accounts are closed and a separate balance account is updated with corresponding account entries on the last day of the fiscal year.

Before closing:

Account Debit Credit
Revenues (Profit/Loss) 2,300
Liabilities (Profit/Loss) 1,100

After closing:

Account Debit Credit
Profit/Loss (Balance account) 1,200
Revenues 2,300
Liabilities 1,100

Example 2: Close/Open Balance Sheet Accounts

The balance accounts are closed and corresponding account entries are created in the year-end period. (If you have defined twelve periods per year, this period will be the thirteenth.) Account entries for reopening the accounts are created on the first accounting date of the following fiscal year as well.

To avoid an unbalanced voucher, this alternative requires that all profit and loss accounts are closed. You close these accounts by selecting the ‘Profit/loss calculation’ check box on the same panel.

Example (including balance accounts only):

Before closing:

Account Debit Credit
Capital 1,000
Fixed Assets 500
Inventory 400
Accounts Receivable 700
Accounts Payable 200
Bank 800

After closing :

Account Debit Credit
Capital 1,000
‘Profit and Loss’ (This is the balance account updated when closing the Profit/Loss accounts.) 1,200
Fixed Assets 500
Inventory 400
Accounts Receivable 700
Accounts Payable 200
Bank 800