CHAPTER 8: PERIOD-END PROCEDURES

Chapter 8: Period-End Procedures CHAPTER 8: PERIOD-END PROCEDURES Training Objectives Actively participating in this chapter helps you: Understand the procedures that are completed at the end of an accounting period. Understand how to consolidate periods and the effects of consolidation. Understand the procedures that are completed at the end of the fiscal year. Understand how to run the Year-end Closing routine and how it affects the accounting system. Page 239

Microsoft Dynamics GP General Ledger Period-End Closing Checklist 1. Post all transactions for the period, including adjusting entries. 2. Print financial statements. 3. Print a trial balance. 4. Make a backup. 5. OPTIONAL: Consolidate transaction detail using the Period Consolidation window. 6. OPTIONAL: Close the fiscal period for the Financial Series using the Fiscal Periods Setup window. Post Transactions for the Period Period-End Closing Checklist, Step 1 Print Financial Statements Period-End Closing Checklist, Step 2 REPORTS FINANCIAL FINANCIAL STATEMENTS By now, you should have entered and posted all adjusting entries to correct transaction detail for the period you want to close. Adjusting entries includes all entries that correct errors made in recording transactions and journal entries used to assign revenues or expenses to the period in which they were earned or incurred. Many of these adjusting entries should have been made automatically if you selected them as reversing in the Transaction Entry window. Entries that increased assets or liabilities could be entered as automatically reversing since they would result in a future cash receipt or payment. Financial statements are typically printed at the end of an accounting period. However, they can be printed at any time. Formatting and printing financial statements is covered in more detail in the next chapter. Page 240

Chapter 8: Period-End Procedures Print a Trial Balance Period-End Closing Checklist, Step 3 REPORTS FINANCIAL TRIAL BALANCE A Detailed Trial Balance is typically printed at the end of the period before consolidation. A Detailed Trial Balance contains a list of accounts and a list of the transactions that affected the accounts for the accounting period. Consolidating a Period (Optional) Period-End Closing Checklist, Step 5 TOOLS ROUTINES FINANCIAL PERIOD CONSOLIDATION Consolidating a period totals the transaction detail into a single summary transaction balance for each account that is carried forward to the next period. Consolidating is optional and can be used if you no longer need detailed information for the period in question. You might want to print a detailed trial balance before completing the consolidation. Once the consolidation is complete, the detailed transactions are no longer available for reporting or inquiry purposes. When a period has been consolidated, you can select it as closed to prevent transactions from being posted to it. Click OK to consolidate the selected period. HINT: Before you consolidate the period, make a complete backup (Step 4) of your company's accounting data. As long as you have a current backup, information can be restored if necessary. Year and Period Perform the following tasks: 1. Select the Year that contains the period you to consolidate and close. 2. Then, select the Period. NOTE: If you select History for the year, you must select the year before the Period. Page 241

Microsoft Dynamics GP General Ledger Ranges Click Ranges to display the Account Segment Ranges window. You can perform the following functions in this window: Restrict by account segment the accounts that need to be consolidated and closed. Enter dates to further restrict the records that need to be consolidated and closed. When you finish, close the Account Segment Ranges window. HINT: Remember to insert the ranges you specify. Only ranges that appear in the restrictions box are used when consolidating periods. If no ranges are inserted, all accounts for the specified period are consolidated. If you restrict the consolidation process by account segments, your reports might not balance. For example, if you post a debit of US$100 to the Cash account and a credit of US$100 to the Accounts Payable account in Period 1 and then consolidate only the Cash account for Period 1, the Cross-Reference Report by Journal Entry is then out of balance by US$100. Also note that once a period has been consolidated, you can no longer print a detailed trial balance for the period. Instead, the account balances appear as one summarized transaction on the trial balance reports. However, you can continue to post to a consolidated period. Transactions posted after consolidation appear in detail in addition to the consolidated balance. Page 242

Chapter 8: Period-End Procedures Close the Fiscal Period (Optional) Period-End Closing Checklist, Step 6 TOOLS SETUP COMPANY FISCAL PERIODS Use the Fiscal Periods Setup window to close a period for the financial series. Once a period has been closed, you can no longer post transactions to it. Completing this step is optional. However, if a fiscal period is closed, it can be reopened at any time to allow transactions to be posted. A Trial Balance can be printed for closed periods since the detailed transactions are still available. Mass Close Click the Mass Close button. The Mass Close Fiscal Periods window gives you the ability to close individual origins for ranges of periods or for all periods. Page 243

Microsoft Dynamics GP General Ledger You can perform the following functions in this window: Restrict the view by year, period range, series, and origin. Choose the origins you want to close. Use Open All and Close All to open or close a range. HINT: When using Mass Close, the series and period in question must be left open in the Fiscal Periods Setup window. Year-End Closing Overview Closing the year transfers all open-year information for each account in the chart of accounts to account and transaction history. It also prepares the accounting system for a new fiscal year. You can enter General Ledger transactions for the next fiscal year without closing the current fiscal year. This leaves the current fiscal year open until all adjusting entries have been entered and posted to the correct periods. In addition to transferring current year figures, the year-end closing process: Reconciles and summarizes the General Ledger balances that have accumulated throughout the year. Transfers current year profit and loss amounts to the Retained Earnings account. Zeroes all profit and loss account balances after they have been closed to the Retained Earnings account. Summarizes balance sheet accounts, bringing the balances forward as the accounts' beginning balances in the new fiscal year. Prints the Year-End Closing Report. HINT: The year end closing routine does not affect the detail maintained in your system. It simply moves it to history where it remains easily accessible through reporting and inquiry windows. There are two different approaches to performing a year-end close in General Ledger: Leave the year open Close the year Page 244

Chapter 8: Period-End Procedures Leave the Year Open You can leave the year open until you receive the adjusting entries from your accountant. The limitation of this is that your balance sheet accounts would not have a beginning balance for the next year. Close the Year You can close the year after all transactions have been posted. Your accountant must give you the adjusting entries first. Then make sure the Allow Posting to History option is selected in General Ledger Setup, and enter and post the adjustments. This updates both the open year and historical year figures. HINT: Although Microsoft Dynamics GP allows you to maintain an unlimited number of open and historical years, you can only post transactions to all open years and the most recent historical year. For example, if 2007 and 2006 are open, while 2005 and 2004 are historical, you can post transactions to 2007, 2006, and 2005 but not to 2004. By now, you should have entered all final adjusting entries for the fiscal year and printed final financial statements. HINT: You can set up a group of year-end reports in the Financial Groups window that collectively prints the financial statements and trial balance each time you close the fiscal year. When the year-end closing process is complete, print the financial statements again and compare the balances. You can continue to work in Microsoft Dynamics GP during the year-end closing procedure. However, once the Year-End Closing window has been opened, a General Ledger batch activity record, GL Close, is created. It is displayed in the Series and Master Posting windows and in the system inquiry window, Batch Activity. NOTE: Posting is not allowed in General Ledger as long as the GL Close batch activity record is displayed in these windows. Page 245

Microsoft Dynamics GP General Ledger Year-End Closing Checklist 1. If General Ledger is integrated with other modules, perform the following tasks: Post final transactions in all modules except General Ledger. Complete the month-end and quarter-end procedures in all modules except General Ledger. Complete year-end closing procedures for all modules except General Ledger. 2. Post any final adjusting entries in General Ledger. 3. Print the Account List and verify the posting type of your accounts. 4. Close the last period of the fiscal year using the Period-end Checklist guidelines. 5. Make a backup. Put backups in safe, permanent storage. 6. Print a final Detailed Trial Balance using the Trial Balance Report window. 7. Print financial statements using the Financial Statement Report window. 8. Set up a new year, using the Fiscal Periods Setup window (if it has not been done). 9. Close the fiscal year using the Financial Year-End Closing window. 10. OPTIONAL: Close all fiscal periods for all series using the Fiscal Periods Setup window. 11. Adjust budget figures for the next year using the Budget Selection window and make a final backup. Page 246

Chapter 8: Period-End Procedures Set up a New Fiscal Year Year-End Closing Checklist, Step 8 TOOLS SETUP COMPANY FISCAL PERIODS Before you can perform a year-end closing, a new fiscal year must be set up using the Fiscal Periods Setup window. Balance Sheet account balances post as beginning balances in the new fiscal year during the year-end closing process. Use the Fiscal Periods Setup window to review or modify the default fiscal periods, or enter different fiscal periods. Before setting up fiscal periods, be sure no other users are logged into the same company. You cannot save changes to the Fiscal Periods Setup window for a company users are working in. With Microsoft Dynamics GP, you can define up to 367 periods per year and you can have an unlimited number of years open at the same time. Each year can have a different number of periods and you can keep an unlimited number of historical years. However, you can post transactions to only one historical year and two open years. For additional information on setting up a fiscal year, consult the Foundation training manual section on setting up fiscal periods. Page 247

Microsoft Dynamics GP General Ledger Year-End Closing Year-End Closing Checklist, Step 9 ROUTINES FINANCIAL YEAR-END CLOSING Use the Year-End Closing window to close your fiscal year in Microsoft Dynamics GP General Ledger. Retained Earnings Account Select Retained Earnings Account to which the year's profit or loss should be closed. The default account comes from General Ledger Setup when you set up the module. You also can transfer the year's profit or loss to a range of accounts that contain a specific account segment. This is often referred to as a divisional retained earnings closing. When you select this option, the total profit or loss balance is posted to each account that contains the segment you selected. Starting Journal Entry Enter the Starting Journal Entry to be used as the first journal entry number in the next fiscal year. To do this, you must perform one of the following tasks: Accept the default, which is one more than the highest posted journal entry number for the current year. Enter a new number. The journal entry number you select is then used as the journal entry number for the Year-End Closing Report. Close the Year Click Close Year to begin the closing process. When the closing is complete, the Year-End Closing Report is printed. This report lists the accounts that have been closed and the transactions used to close them. The Year-End Closing Report is part of the audit trail and should be saved with your company's permanent records. NOTE: This report cannot be reprinted. It is important that you print the report and file it for future reference. It is the only complete record of the year end close routine. Page 248

Chapter 8: Period-End Procedures Close Fiscal Periods Year-End Closing Checklist, Step 10 TOOLS SETUP COMPANY FISCAL PERIODS Use the Fiscal Periods Setup window to select all periods for all series as closed. This prevents transactions from being posted from any module to any period in the year you closed. Once a period has been selected as closed, you can no longer post transactions to it. Completing this step is optional and should not be done until you are sure that no adjusting transactions are needed for the closed year. HINT: If you discover adjusting transactions after you have closed the fiscal period using this window, you can return to this window and re-open the period by removing the check box. You can then make your adjusting entries and close the fiscal period again. Mass Close Click the Mass Close button to open the Mass Close Fiscal Periods window. This window allows you to close individual origins for ranges of periods or for all periods in a year. You might want to use this window to close the origins for all series except the Financial Series. You might also want to close all Financial Origins except General Entry. Page 249

Microsoft Dynamics GP General Ledger Quick Interaction: Lessons Learned Take a moment to write down three Key Points you learned in this chapter: 1. 2. 3. Page 250