Transferring Year End Profit or Loss to the Balance Sheet
At the start of a new year, whether or not you have run a year cleardown, you normally transfer the old year's net profit or loss to a balance sheet account. Before this is done, a trial balance printed for the new year shows the relevant amount. SunSystems automatically prints a line, 'Total Prior Year's Profit/Loss', immediately before the report totals.
Once you have reconciled and confirmed this value the transfer is carried out as follows:
- Ensure you have a profit and loss account called, for example, Prior Year Profit/Loss. This account should not have an account code within the range normally included on any financial reports. This is required for system technical reasons.
- Create your balance sheet account called, for example, Retained Earnings, which forms part of the balance sheet.
- Print a Trial Balance for the first period in the new year, and note the amount called prior year's net profit/loss.
-
The profit and loss entry is ignored in the new year's trial balance, but the balance sheet entry is included.