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FrontAccounting forum → Banking and General Ledger → Year-End Closing Procedures
For those that have used this software over a year can you please post the proper way to prepare the software for year end closings.
I have tested JE to close the Revenue and Expense and accounts to retained earnings account. JE posted without a problem but my delima is that when I run a report for Balance sheet, the page comes out blank. What I am doing wrong here?
There are some discussions around in this forum about how to handle the year end closure.
There must be something else wrong if your balance sheet is empty.
When bringing a profit forwards to the retained earnings you only need to involve this balance account.
You can do this in 2 ways. Either close all the non-balance account one by one and counter post on retained earnings (debit / credit).
Or you can create a new account, maybe the last one, and call it Year result. Debit this account with the result (or credit if loss),
credit Retained earnings (or debit if loss).
I prefer the second method. This way you have the following benefits:
You can still get multiyear results for dimensions. The transactions for earlier years are still there, but remember, when selecting trial balances or other reports where income/cost accounts are included these Opening balances is taken from the beginning of the fiscal year.
Opening Balances for balance accounts are always taken from the start of the accounting.
But by selecting a period over more than the current fiscal year, you will still have a possibility to get income statements for dimensions and this is extremely powerful for multiyear dimensions like projects.
/Joei
Thanks Joe for taking time to give me details info on this topic. I actually booked JE to close out Expense and revenue out one by one. My trial balance has the retained earnings correct figure and my expenses and revenue accounts are now zeroes. But when I ran balance sheet report my result is empty page. I was able to run the balance sheet report before the closure. Maybe there is something that I screwed up. I will give the second option a trial tonight and will let you know if it works for me.
Again, thank you very much for your time.
Hello, please set $go_debug=1 and $pdf_debug=1 in config.php and try genearte the report again. This should give some error messages explaining the reason of the strange behaviour.
Janusz
Thanks guys for the contributions, here is what I did, created a new db and restored data from backup. Make sure that no JE post dated on 12/31/2007. Booked my JE to transfer revenue to Retained Earnings dated 12/31/2007. Now, when I run a report for from 01/01/07-12/30/2007 I was be able to produce my P&L for 07. The Balance sheet report now prints and my 2008 opening balances is accurate. I didn't know why I got the weired outcome before. My BIG thanks to Joe and Itronics..
NOTE: Although it is a matter of choice, I think I preferred your second choice Joe, creating a Year end clearing account make it easier and eliminate JE error.
My fear was that since the account was not closed out account by acount with JE, the year ending balance (R&E accounts) was going to roll forward to the following year. NO, my thought was wrong. Revenue and Expenses balances doesn't carry over. THIS IS GOOD. Thanks guys.....
What if we have JE posts dated on 12/31/2007?
Does anybody have a suggestion to isolate the closing JE from the rest?
I have seen some system using a 13rd period reserved for closing entries. Is something like this possible with FA?
Thanks in advance,
Claude
No, there are no periods defined in FA. You simply select your periods yourself when reporting.
There are no problems having JE posts on 12/31/2007. You don't need an extra period for the closing entries. Every entry you make should be available inside the fiscal year.
And if you don't want to close your years, the reporting will still work. All income/expense accounts do not have an open balance (unless you are selecting inside a fiscal year, then it will show open balance from the beginning of the fiscal year). Assets/Liabilities/Equity will always have incoming balances from the very beginning.
If you don't close your fiscal years, then the trial balance will have an unbalance opened balance, because the year closure is missing. But this is no problems for reporting.
But of course you should make the close balance when you are finished with a fiscal year. And after that you should close the fiscal year. In my opinion the best is to create an account in the expense as a last account and debit this and credit the retained earnings balance account with the revenue for the year (credit / debit if you have a loss).
/Joe
Hi everyone,
I had already created the closing JE and posting is done on 12/31/07.....but the problem is when i generate the income statement for the year 12/31/07 it will show up "0" Net income.....just because of my entry made....closing the net income into an income summary account(Temporary/Expense account type) and closed it to Retained Earnings.....now my concern is ....closing JE does it affect the income statement report....Just an observation..
Joelg
My advise is when closeing fiscal year you should create an account (the last one of the expense accounts) and call Year End Result (or something like that). After you have done your depreciations and other year end posting you should create an income statement to see the calculated return.
This calculated return value should then be posted in debit on the newly created account and credited Retained Earnings account (counterwards if the calculated return is a loss).
If you later want an income statement for the closed year, the calculated return will be 0, but you will have the year result in the Year End Result account.
/Joe
Hi Joe,
Thanks for the clarifications.......
Regards,
Joelg
This topic should be a wiki page.
Can this annual activity be automated in any way?
tom
The closing of a fiscal year is done automatically, when you close it. But you should wait until all the year-end entries has been done. When the year is closed you can no longer make entries into it.
The procedures will be updated on the wiki asap.
/Joe
Hmm, I'm trying to understand how FrontAccounting actually closes the books and I'm still struggling.
Here is what I normally do on Dec 31:
1) A credit entry to every expense account with the total expense amount debited to a temporary account.
2) A debit entry to every income account with the total income amount credited to the temporary account.
3) The profit (or loss) debited (or credited) to the temporary account and the Retained Earnings credited (or debited) to zero out the temporary account.
I see that I can still do that in FrontAccounting and when the books are closed, no automatic magic happens. However, after reading this thread, I am confused as to what exactly FrontAccounting tries to do on its own if I let it close the books without manually making these entries.
For instance, I have two long term liability accounts -> Startup costs (which is the capitalized start up losses) and Profit/Loss which is the cumulative retained earnings. I told the system to use my temporary account as 'Profit/Loss year' account and the Profit/Loss account as the 'Retained Earnings' account.
In 2009, I had a total loss of $269.31. I see $269.31 Debited to the 'Profit & Loss' Account and 269.31 Credited to the temporary account.
So the total amount debited to the Retained earnings is correct, but none of the income or expenses are zeroed out and I now have this temporary account carrying a credit of $269.31.
What exactly is FrontAccounting doing here?
What are the benefits of doing it that way vs what I have been doing?
Thanks
Hi Guys.
I have a problem here relating to the year end 306/2010 which I still don't understand after reading the Wiki and this thread. I need to fix this as the next year is fast approaching (end of this month).
I have a closed Fiscal year for year ended 30/6/2010
I had a loss of $6657.33 for the year ended 30/6/2010 and the trial balance for the 2010/11 year is out by this amount CR as an opening balance
I have two accounts in the equity section of my GL
31000 Net profit (loss) - Opening Balance at 1/7/10 $6657.33 CR
32000 Retained earnings - Opening Balance at 1/7/10 $6657.33 DR
Expense accounts are in a higher numbered class (19) than equity (15)
EDIT: I made a new expense group at the end of the expenses and moved retained earnings account to this group and now the Trial Balance is out by double this amount CR. and the retained earnings account has a NIL Balance.
So how can I fix this?
Just as you say rodw, you end your fiscal year with a profit/loss of some amount.
When the year is closed FA automatically move this profit to Year profit Loss, which should be the last account in expense group.
And the counter booking is going to Retained Earnings.
One of the reasons for doing it this way is that you can still take Profit&loss statements for dimensions(projects) over several years.
And of course also for the company.
You can eventually correct mistakes done by setting wrong year-end accounts in System an GL Setup by opening the fiscal year again. Void the Jornal Entry for the closing. And void other transaction mistakes. Make sure you use the correct year-end accounts. Then when it is correct, then close the year again.
/Joe
Joe,
Thanks for the advice. I have it sorted now. This is what I did:
1. Poured myself a scotch
2. Drank about half of it
3. Made the prior year active
4. voided the closing entry
5. Ran a trial balance for prior year - it balanced
6. Tried to close the year again and got a new informative error message in 2.3.4 telling me I had the accounts set up wrong!
7. Lowered the level in my glass a bit more...
8. Made sure Retained Earnings was in my Equity Class
9. Made sure Profit (loss) was in the new Expense Group I created above
10. Closed the prior year
11. Set the current Year as the active fiscal year
12. Ran a Trial balance and it Balanced! 
13. Drained my glass and poured another to celebrate
EDIT:
14. Raised a toast to the FA development team!
Thanks for your nice words and I may have heard you with the toast.
I too had a couple of scotch last evening
/Joe
This really needs to be in the wiki!
(all of the above... well the important activities)
How do I get rid of retained earnings?
Do I do a Bank Payment and select that account?
How about converting Loans from Shareholders to loss?
Pay it back somehow?
tom
Hello tom,
The retained earnings is the accumulated earnings during the years. This is yours or the shareholders money and can be destributed to you or the shareholders. Then this account will be debited and some of the bank accounts will be credited.
Yes maybe we should improve the Wiki a bit here, although some information about this is already there.
Will you check that, tom?
/Joe
I searched for "YEAR" and did not find anything relating to year end close-out.
If you look under Setup, Fiscal Year ( where the content is built as the menu strings ) you will find something at the very end.
/Joe
Well this is all it says...
When you start a new Company, you should check that the Fiscal Year is setup correctly. If this is not your starting Fiscal Year, then you should start by creating the starting Fiscal Year. After you have corrected the starting Fiscal Year, you can delete other Fiscal Years if there are no transactions in them. Now set this new Fiscal Year on your company by selecting Setup tab, Company Setup.
If the first year is setup as Jan 01 2011 - Dec 31 2011 and your starting Fiscal Year should be Jul 01 2011 - Jun 30 2012, then you must first create a short dummy year, Jan 01 2012 - Jun 30 2012. Create another Year Jul 01 2012 - Jun 30 2013. Set the company to use this year. Now close and delete the year Jan 01 2011 - Dec 31 2011. Close and delete the short dummy year Jan 01 2012 - Jun 30 2012. And then create the correct broken Fiscal Year Jul 01 2011 - Jun 30 2012. After the creation, set this Fiscal Year as active on the company. You are now ready to make your transactions. You have 2 fiscal years and you are using the current one.
When you reach the end of your Fiscal Year, you have to create another new Fiscal Year. When you want to switch Fiscal Year on your company, go into company setup and do that. When you have finished your year-end entries, you may close the Fiscal Year.
A closed Fiscal Year can no longer be used for entries. When a Fiscal Year is closed, the difference between all asset and liability accounts are brought forward as a Journal Entry where the Default account for Retained Earnings is credited (if this is a profit, otherwise it is debited). And the default account Profit/Loss Year is debited (if this is a profit, otherwise it is credited).
You can have as many Fiscal Years running as you want, but for performance reasons you should not have more than needed (by your legislations). When you delete a Fiscal Year, the assets, liabilities and equities are brought forward. All other unneeded transactions such as documents are deleted.
Tips and Tricks
----------------------
What I am trying to do is take the retained earnings and get rid of them, I think it was a mistake from 2 years ago.
Last year when I needed to put money into the business I deposited it as a Loan from shareholders.
I want to convert that to a loss without messing with the bank accounts.
Oh My... I think the light bulb just went on...
Do I need to do two Journal Entries?
Like:
Debit 2680 Loans
Credit 9990 Year Profit/Loss
Is a Credit to 9990 a Loss?
tom
Tom start here
http://www.cliffsnotes.com/study_guide/ … 21002.html
Pick your structure and get your chart of accounts to agree with the correct format.
I've had a go at replying a couple of times but have lost my post. Sorry.
If you are a company, you should leave your loan as is. If you are a sole trader or partnership, you need an extra account in the equity section where retained earnings called Capital Introduced. Journal you loans to this account. Leave the retained earnings as is. I also keep an account for drawings which records the money I take out and this is a bit simpler than what the link proposes how it should be treated if you got a CPA to prepare your books. The sum of these three accounts will give you what you want. A simple total of what the business is worth!
Maybe I am handling things incorrectly...
I use the Loan from Shareholders for then I use personal money for expenses that can be written off to the business.
I do not what that money back, as the business usually ends up at an operating loss.
Maybe there is a better way to do this.
tom
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