Year End Closing — Exercises

IMPORTANT
It is extremely important that you set up and work within your own company to maintain your data integrity. If you work within any other company, your exercises will not function as intended and the data of other students might be affected. Predictable exercise results require that your data is isolated in your own company.

Required Data

Purpose: The purpose of this exercise is to set up the company for the year-end closing process. These exercises are specific to the end of the year. The period closing and basic data exercises should be completed before year-end closing.

End of Period 

Basic Data Setup

Accounting Rules

Purpose: The purpose of this exercise is to set up the basic data required to transfer balances to the new operating year, post profit or loss, and close the year. The following exercises assume that you are using 12 calendar periods. Adjust the exercise based on the number of periods in your company.

Year-end periods are dated the same day as the last day of the accounting year. You can have different user groups for each year-end period.  When manual vouchers are created, the user can select the user group that is attached to the period where the user wants the voucher to be posted.

Windows:
User Groups

  1. Populate the window.
  2. Add a new user group for each year-end period that you will be creating.
  3. Enter one or more user groups as follows:
User Group Description Year End Period Allowed
13  User Group for Period 13 Check the box
14 User Group for Period 14 Check the box
  1. Save.
  2. Highlight the new user groups, right-click and select Users per User Group from the menu.
  3. Add the users who will be completing year-end transactions to each user group.
  4. Save.

Windows:
Accounting Periods

  1. Query for the year to be closed.
  2. Enter one or more year-end periods as follows:
Period Description Valid From Valid Until Period Type Period Status
13  Year End Period 13 Last day of the accounting year Last day of the accounting year Year Closing Open
14 Year End Period 14 Last day of the accounting year Last day of the accounting year Year Closing Closed

Note: Only one year-end period can be open at a time.

  1. Save.
  2. Highlight a year-end period line, right-click and choose User Groups Per Period from the menu.
  3. Enter the appropriate user group that was created for this year-end period.
  4. Save.
  5. Repeat steps 5 through 7 for each year-end period.

Windows:
Posting Control

  1. Query for posting type GP8, the posting type for closing the revenue and cost accounts to retained earnings.
  2. If the posting type has not been set up, enter the following:
Posting Type Code Part Control Type Default Value
GP8 Account AC1 Choose your retained earnings account from the list of values
  1. Save.

Windows:
Voucher Series per Voucher Type

  1. Query for your manual voucher type to be used for posting profit and loss.
  2. Highlight the years, right-click and select Create User Groups per Voucher Type from the menu.
  3. Enter the following data:
User Group Authorization Level Default Type Function Group
Select the correct user group from the drop down menu Enter and Approve Yes M
  1. Press OK.
  2. Save your changes.
  3. Query for your year-end voucher type to be used if you choose to transfer final balances with two year-end vouchers. 
  4. Highlight the years, right-click and select Create User Groups per Voucher Type from the menu. 
  5. Verify that the correct user groups are connected to the voucher type. 

Main Exercise

Transfer Preliminary Balances

Purpose: The purpose of this lesson is to transfer the preliminary year-end balances to the next year. This enables users to see balances in the new year as they continue to run the business while the accounting department is closing the books for the prior year. This step can be repeated as often as necessary prior to the final year-end transfer of balances.

Windows:
Preliminary Year End GL

  1. Enter the following information:

From Year To Year
Enter the year being closed  Enter the next accounting year

  1. Press OK.

  2. A pop-up box will appear with a message that the balances have been transferred.

Year-End Adjusting Entries

Purpose: Once the preliminary balances have been run, many companies enter manual vouchers into a year-end period to adjust for year-end accounting requirements. These entries should be completed prior to posting profit or loss for the year. 

Windows:
Voucher Entry

  1. Enter manual journal entries as needed for year-end processing.

  2. Remember to change the user group if the entries should be entered into a year-end period.

Post Profit or Loss

Purpose: The purpose of this lesson is to transfer the profit or loss for the year. Profit and loss are calculated as the difference between revenues and expenses during the year. The accumulated profit or loss is posted at the end of the year during the last year-end period.

Windows:
Update GL Vouchers

  1. Update all vouchers for the year to the general ledger.

Windows:
Clear Revenue/Cost Balances

  1. Enter the year to be closed.

  2. The open year-end period will appear default into the window.

  3. Select the user group and voucher type from the List.

  4. Press OK.

  5. An information message Clearing of Revenue and Cost Balances completed. Voucher is created. will appear.

  6. Press OK.

Windows:
Voucher Entry

  1. Query for the clearing balances voucher.

  2. Approve the voucher and save.

  3. Right-click and select Instant Update General Ledger from the menu.

  4. When the Instant Update window appears, press OK.

  5. When the Journal number is presented, press OK.

Note:  This process can be done as a manual entry by posting the net profit as a debit to the current year revenue account and the credit to a retained earnings equity/liability account. A loss would be posted by reversing the debit and the credit.

Close Periods

Windows:
Accounting Periods

  1. Query for the year being closed.

  2. Change the period status to closed for all periods.

  3. Save.

Transfer Final Balances

Purpose: The purpose of this lesson is to transfer the final year-end balances to the new operating year either as balances only or as one voucher for the closing balance and one voucher for the opening balance. All transactions must be complete and all periods closed before running the final process. 

Windows:
Final Year End GL

  1. There are two ways to transfer final balances. Follow step 2 to 4 transfer final balances only. Follow step 5 to 8 to transfer final balances with two year-end vouchers. 

  2. To transfer final balances only, enter the following information:

Transfer Year End Balances From Year To Year
Checked Enter the year being closed  Enter the next accounting year

  1. Press OK.

  2. A pop-up box will appear with a message that the balances have been transferred.

  3. To transfer final balances with two year-end vouchers, enter the following information: 

Create Year End Vouchers From Year To Year User Group Voucher Type
Checked Enter the year being closed  Enter the next accounting year Enter a year-end user group Enter a year-end voucher type

  1. Press OK. 

  2. A pop-up box will appear with a message that the balances have been transferred. 

  3. The year-end vouchers must be updated to the general ledger in order to transfer the final balances. 

Open Up Closed Accounting Year

Purpose: The purpose of this lesson is to open up a closed accounting year. Before a closed accounting year can be opened up, a Final Year End must have been executed. 

Windows:
Accounting Periods

  1. Populate or query for the accounting year you want to open up. 

  2. Right click and select Open Up Closed Accounting Year. Press OK to roll back the executed Final Year End. If the rolling of year-end balances has been performed with year-end vouchers, a dialog with information about both the original year-end vouchers and the rollback vouchers will show. Press OK. Another dialog will show with more details about the new rollback vouchers. Press OK. 

  3. The status of the year now will be changed to Open, but the periods will still be closed. The periods now can be opened manually.

  4. The year-end rollback vouchers must be updated to the general ledger in order to rollback the final year-end balances.