As we all know, a business’s financial year (also called a fiscal year) often does not align with the calendar year. Some businesses follow the traditional tax year (April – March), some follow the calendar year, and others go with something completely different. For example, here at Bevica, our financial year is May to April. In this blog, we look at what you need to do, regardless of when your financial year begins or ends, to close out the financial year in your Bevica system.
There are three stages which you need to complete in the Bevica year-end closing process:
1. Close the financial year
The first stage in the process is to close the financial year. This is done by using the Close Year function on the Accounting Periods page.
- Use the Search bar to navigate to the Accounting Periods page.
- Select Process action and then Close Year action.
- Once the batch job for this has run:
- The Closed and Date Locked fields for all periods in the newly closed financial year are selected and they can no longer be cleared.
- The Date Locked field for the first period of the next financial year is selected and it can no longer be cleared.
- The period lengths for the closed periods cannot be changed.
- It isn’t possible to reopen a closed financial year. As you must always have at least one open financial year, it is important to make sure that you create a new financial year before you close out the old one (See Creating a new fiscal year).
It is important to note that although a financial year has been closed, you are still able to post general ledger entries to it. When you do this, the entries will be shown as posted to a closed financial year and the Prior Year Entry box will be checked.
2. Generate a year-end closing entry by using the Close Income Statement batch job
The second stage is to close the income statement of the financial year you are closing and generate a year-end closing entry. This is done by running the Close Income Statement batch job. This will transfer the income statement account balances to an account in the balance sheet.
The Close Income Statement batch job also creates lines in a journal that are posted manually. It is possible to use the Close Income Statement batch job multiple times to transfer the income statement account balances. You need to do this to transfer balances when entries are posted into a closed year.
To close the income statement, follow these steps:
- Select the Search for Page icon in the top-right corner of the page and enter Close Income Statement.
- On the Close Income Statement page, fill in the following fields (see diagram below):
- Fiscal Year Ending Date – This field is automatically populated with the last date in the latest closed financial year. This date is used to determine the posting date of the journal.
- Gen. Journal Template – This identifies the name of the general journal template that the entries are added into.
- Gen. Journal Batch – This identifies the name of the general journal batch that the entries will be added into.
- Document No. – This field is automatically populated with the next available number from the number series for the selected General Journal Batch.
- Retained Earnings Acc. – Identifies the balance sheet account that the retained earnings entries are added into.
- Post to Retained Earnings Acc. – Specifies if the resulting entries are posted with the Retained Earnings account as a balancing account on each line (Details) or if retained earnings are posted as an extra line with a summarised amount (Balance).
- Posting Description – This specifies the text to accompany the entries. The default text is Close Income Statement.
- Close by – This provides the available accounting options to classify into multiple entries. If neither option is used, a single entry is created for each account. The options available are:
- Business Unit Code – If this field is selected, and the company is a consolidated company, separate entries are created for each business unit.
- Dimensions – For any dimensions that are selected, one entry is posted for each dimension value combination that is used in a G/L account. It is important to select any dimensions that you have as mandatory dimensions on P&L Accounts so journal lines are created per dimension/GL account.
- Inventory Period Close – This indicates that the inventory period(s) with ending dates equal to or greater than the last date of the accounting period has been closed.
3. Post the year-end closing entry to specified journal
- Once the Close Income Statement batch job has run, the closing entries will be transferred to the specified journal batch. If you have set up an additional reporting currency on your General Ledger Setup page, the journal will be able to post automatically. If you have not, you will have to manually post the entries.
- If you did not specify the account that the retained earnings entries are added in Retained Earnings Acc. field in the Close Income Statement batch job, one or more lines will need to be inserted into the journal with the retained earnings account as well as the amount that will be posted to the account.
- The posting date on the journal lines is the Fiscal Year Ending Date used in the Close Income Statement batch job. This date will be automatically preceded by “C”. This indicates that the entries are closing entries. You can use this as a filter for reporting purposes. For example, on the G/L Balance page, you can choose to include or exclude closing entries.
- When the journal is posted, one or more entries are posted to each income statement account so that its balance becomes zero. Also, the retained earnings account is updated for the gain or loss.
Click here to watch a video demonstrating how to close a financial year in Bevica and Business Central.
How we can help you
If you want to know more about Bevica (powered by Microsoft Dynamics 365 Business Central) and how it could help your drinks business, please feel free to contact us to arrange a demo to see how it could be the perfect ERP to help you overcome your business challenges.