- Back up the system.
- Ensure that everyone is logged out of the company that you’re closing.
- Ensure that all open batches relating to the prior year are either posted or deleted.
- Transactions > Financial > Batches, use Lookup to see which batches exist, and check the date on each of these batches to ensure that they don’t relate to the year being closed.
- Repeat above steps for Invoicing Batches, Receivables Batches & Payables Batches.
- If applicable, complete the closing procedures for Inventory.
- Ensure that the subledgers reconcile to the General Ledger.
- Print and/or save to a file, a GL Summary Trial Balance report as of the year end date.
- Print and/or save to a file, a Receivables Historical Aged Summary Trial Balance as of the year end date.
- Print and/or save to a file, a Payables Historical Aged Summary Trial Balance as of the year end date.
- Compare the balances from the Historical Aged Trial Balance reports to the linked account balances on the GL Trial Balance.
- If there are any discrepancies, resolve them before moving on with the closing.
- If there are no discrepancies, print and/or save to a file, the Historical Aged Detailed Trial Balances for both Receivables and Payables for your records in the event that there is an out of balance issue later that needs to be investigated.
- Verify that all accounts have been assigned the proper “Posting Type”. Note that the posting type determines whether an account is closed to the retained earnings account or whether an account brings a balance forward to the next fiscal year. If the account balance will be brought forward at the end of the year, the posting type must be set to “Balance Sheet”. If the account balance will be closed to a retained earnings account at the end of the year, the posting type must be set to “Profit and Loss”.
- Go to Smartlist > Account Summary and click Search.
- Under Search Definition 1, “Column Name”, click on the lookup and change the view from “Selected Columns” to “All Columns”, then choose “Posting Type” and click “OK”.
- Leave filter as “is equal to” and change value to “Profit and Loss”.
- Under Search Definition 2, enter the criteria, “Account Number”, “is less than”, and use the first possible Income Statement account.
- The result should be no accounts. If there are any accounts displayed, the Posting Type needs to be changed for those accounts under Cards > Financial > Account.
- Repeat the process above by changing the qualifiers to be “Balance Sheet” for Search Definition 1 and “is greater than” for Search Definition 2. You can still leave the same account number as long as you know that it is before your first actual income statement account. Otherwise you should change it to the last possible balance sheet account or know that if that account shows up it’s not an error. Just use common sense! J
- Again, if any accounts are returned, you need to correct their posting type.
- Close the last period of the fiscal year for all modules that remain open (Tools > Setup > Company > Fiscal Periods).
- Note that you may have to keep one period in the most recent historical year open to prevent the error message: FRX Print Engine Failed to Load the Company Calendar. I have never encountered this error. However, if you do encounter this error, open the period that is least likely to be posted to.
- If you have not already done so, set up a new Fiscal Year from this same screen (Tools > Setup > Company > Fiscal Periods). Under Year, type in the new year, ensure that the First and Last days are correct, then click “Calculate” to populate all of the relevant periods. Assuming that you’re happy with what the system calculated, click “OK” to accept them and close the screen.
- Perform file maintenance on the Financial series group of modules by running Check Links (File > Maintenance > Check Links). Choose Series: Financial, click “All”, then click “OK”.
- Print and/or save to a file, a final GL Detailed Trial Balance report. Note that you may wish to print a new detailed report later if/when additional entries are made (such as year-end journal entries).
- Optional: print the year-end financial statements for your records.
- Close the fiscal year (Tools > Routines > Financial > Year-End Closing)
- Verify that the Retained Earnings account is correct. If not, you can change it here. All current-year earnings/losses are transferred to the account that you specify here.
- . Specify the number that you want to use as the first journal entry number for the next fiscal year in the Starting Journal Entry box or accept the default number. The default number is one more than the highest journal entry number that is posted for the current year. The journal entry number that you specify is used as the journal entry number for the Year-End Closing report, and then increments up for the next fiscal year.
- Most of my clients do not click “Remove Unused Segment Numbers” as we have all possible segment numbers set up in all the databases intentionally, whether or not they are currently used.
- To start the routine, click “Close Year”. Important Click “Close Year” only one time. If you click more than once, you will close more than one year during the process. Also, if the progress window appears to stop at 50 percent, do not restart the routine. As long as the hard disk is processing, let the process continue.
- When the year-end closing routine is complete, the Year-End Closing report is printed. This report lists the accounts that were closed and the transactions that were created to close those accounts. The Year-End Closing report is part of the audit trail, so you should save it for your records as it cannot be reprinted.
- Use your inquiry windows to confirm that the Balance Sheet account balances were brought forward, and P&L accounts were closed to Retained Earnings.
- Adjust the budget figures for the new year.
Note
If you are maintaining the account history, the year-end closing routine transfers all current-year information for each account in the chart of accounts to the account history. If you are maintaining the transaction history, the year-end closing routine also transfers all current-year information for each account in the chart of accounts to the transaction history. The process then prepares the accounting system for a new fiscal year. In addition to transferring current-year figures to the transaction history and to the account history, the year-end closing routine does the following:
- Reconciles and summarizes the GL balances that accumulated throughout the year.
- Removes accounts that are marked as inactive if the accounts match the criteria for deleting a posting account. Inactive accounts that have been set up as budget accounts can also be deleted if they have no activity for the year. These accounts can be deleted even if budget amounts from past years are associated with these accounts.
- Moves all profit and loss account balances to the retained earnings account.
- Summarizes balance sheet accounts and brings the balances forward as the beginning balances of the account in the new fiscal year.
- Prints the Year-End Closing report.