This is a short description of the process involved in closing a financial year. The following steps must be followed:
- Provisionally close the financial period / year
- Determine retained earnings amount
- Post the retained earnings amount
- Wait for the batch run that posts business transactions
- Effect a final close date
- Produce a trial balance
Please make reference to the relevant sections of the User Manual for more details, where necessary. Cross-references are included in the text that follows.
In order to stop day-to-day entries going into a financial year that is about to be closed, the financial year (the last period of the year) must be provisionally closed.
Note:
Entries can still be passed into a provisionally closed period. This can be done by a user with the necessary access.
It should be noted that these provisionally closed period figures might already have been provided to the auditors.
Once all adjustments have been made and the audit has been finalized, the final close of the financial year may commence.
The first step is to determine the retained earnings profit or loss amount as at the last day of the financial year.
To determine the retained earnings profit or loss amount, a trial balance report must be selected as at the last day of the financial year. The result may display either a profit or a loss.
Example:
|
Trial Balance |
DR Amount |
CR Amount |
|
Total Income |
|
10.00 |
|
Total Expenses |
3.00 |
|
In the above example, a profit of R7.00 was made.
Once the retained earnings profit or loss amount has been determined, it must be posted in order to clear the income and expense accounts and move the money to the reserve account.
In order to post the retained earnings, a manual journal entry must be created. This is done by creating an online journal entry.
In the above example, a profit of R7.00 was made. The following entry must be passed:
Process : MANUAL INITIATE
Accounting Activity : RETEARPROFIT (RETEARLOSS if there was a loss)
Amount : R7.00 (determined via the trial balance)
This will clear the income and expense accounts and move the money to the reserve account.
If necessary, you may have to initiate the batch run.
The business transaction post batch run (B_JU2AA) will post all outstanding transactions. This is an overnight run, and posting will only be effected when the run is completed, which may be the next working day. On successful completion of the batch run, all financial enquiries will display the posted transactions.
Note:
The trial balance generated from the Accounting menu is not dependent on this batch job having run. The trial balance generated from the Scheme Reports menu is, however, dependent on this batch job.
For more details, refer to
Processes
Contributions
Income
Income
Select Batch
Once the batch run has completed, the accountant (or a person with the necessary security access), may finally close the financial period. This is done by using the final close option on the financial period calendar.
Note:
The final closing of the period during the financial year (i.e. not the last period), does not require a retained earnings journal.
The trial balance produced using this facility contains all transactions, whether or not they have been posted.
A trial balance can also be generated from the Scheme Reports menu, but this version contains only transactions that have been posted
Note:
Posting the retained earnings amount can be done long before the final close. In fact, it is advisable to do this as early as possible so as to ensure that the correct reserve opening balances are carried forward to the next financial year. If this is not done, trial balances in the new year will not balance (with the profit and loss amount) until the retained earnings journal of the previous year has been passed. If, as a result of the audit, any entries are passed affecting the profit of the scheme, then retained earning adjustments entries can be passed.