Many companies will have a fiscal year that closes on December 31st and will need to process their year-end close activities. If your fiscal year does not align with the calendar year, no worries, you will be able to complete these tasks at the appropriate time.
These tasks may consist of creating new accounting periods for the new year, reviewing general ledger accounts and their associated balances, closing the accounting periods for the historical year, and closing the income statement accounts to retained earnings. You will want to ensure that all transactions are posted for the year being closed. You will also want to make sure that currency and exchange rate data is up to date. It should be noted that Business Central only requires accounting periods to close income statement accounts or to run data compression tasks. Your tasks may differ slightly depending on your company requirements and settings.
I generally suggest that you review your chart of accounts to ensure that the accounts are set up correctly. Meaning that the balance sheet accounts have Income/Balance type of Balance Sheet and the income statement accounts have an Income/Balance type of Income Statement. This will ensure that Business Central handles the balances in the account appropriately.
You can complete this task simply by reviewing the Chart of Accounts list page. You can also set up filters such as filtering on the account number range and the Income/Balance Type. I have my accounts set so that numbers beginning with 1, 2, or 3 are Balance Sheet accounts and numbers beginning with 4 through 9 are Income Statement Accounts. I then create two filters. The first filters on numbers 10000 through 39999 and the Income/Balance is set to Income Statement. This will provide me with a view of any accounts that were miscoded as Income Statement accounts that should have been Balance Sheet accounts. I also do the opposite for a filter, where I have a number range of 40000 through 99999 and the Income/Balance of Balance Sheet. This will provide me with a view of any Income Statement accounts that was miscoded as a Balance Sheet accounts. If my views are blank, then I know that all my accounts are set up correctly.
In Microsoft Dynamics 365 Business Central, the reporting periods are known as Accounting periods. These are periods of time for your company to report your financial performance. Most of the companies I have had the pleasure of working with generally set their accounting periods up as either months or quarters.
When you are closing the year, ensure that you have a new year created. I generally create the new year prior to closing out the prior year. When you close the fiscal year, the Closed and Date Locked check boxes will be marked for all periods in the year. You cannot reopen a year or clear the check boxes. But you will still have the ability to process entries into the closed year. I’ll explain that process near the end of this discussion.
To create new accounting periods (fiscal year), use the Tell Me (search) and enter Accounting Periods, then select the related link. The Accounting Periods page will display. You can use the +New to create each period manually, or the Process > Create Year to create all periods for the new year. If you choose the Create Year action, then you will be prompted for the Starting Date, Number of Periods, and Period Length. When you click OK, it will create all the periods based on the criteria.
To close the accounting periods, use the Tell Me (search) and enter Accounting Periods, then select the related link. The Accounting Periods page will display. Choose Process then Close Year. The earliest year that is open will be selected. You will see this in the message that displays identifying the year being closed. When you choose Yes, the applicable fiscal year will close, and the boxes will be checked for the Closed and Date Locked fields.
Once you have the accounting periods updated, you can then run the Close Income Statement batch job. This will transfer the information from the Income Statement accounts to an account (generally retained earnings) in the Balance Sheet. This will create a journal entry with lines that cancel out the respective balances of all general ledger accounts with an Income Statement type. To process the batch job, use the Tell Me (search) and enter Close Income Statement then select the related link. You will be prompted to identify things like the year ending date, the template, the batch, and the balance account (retained earnings). The entries are not posted automatically. You then must post the journal. The only exception to this is if additional reporting currency is being used. If additional reporting currency is used, the batch job posts entries automatically to the general ledger. You will note that the posting date is prefixed with the letter C. This indicates that the entry is a closing entry.
As I mentioned earlier, even though the accounting periods are closed and the batch job is complete, you can still create and post general ledger entries (adjusting entries) into the fiscal year that is closed. As these entries are marked as posted to a closed fiscal year, the Prior Year Entry check box is selected. You can personalize your page to include this field to display on the page. After you process entries to the closed year, it is necessary to run the Close Income Statement batch job. It will transfer the results of these entries to the balance sheet just like if you were closing the full year. You would repeat these steps each time you post entries to the closed year.
So, as you can see – the process is quite simple. In brief, review your accounts, process/post transactions, create new year, close old year, process batch job, and post the entries. Please note that your company may require additional tasks depending on your situation and settings.
This blog was originally posted on dynamics-discussion.com