Hello All,
With this blog, I would like to outline the Process of executing Balance carry forward and Closing year.
To close year, Below Prerequisites must be fulfilled.
- The preceding fiscal year is closed.
- You have performed a depreciation run for the fiscal year.
- You have performed balance carry-forward for the year.
You perform balance carry forward as the last phase of year-end closing, which usually means that you do this in the new fiscal year. The opening balances of the balance sheet accounts need to have been posted at this point.
Balance carry-forward transfer the Balance of G/L account from one year to next year. This will ensure that Net profit/Loss is correctly reported in the balance sheet.
The balance sheet accounts and the profit and loss accounts are carried forward as follows:
- The balances of the balance sheet accounts are carried forward into the next fiscal year. This ensures that the closing balances of the balance sheet accounts in the fiscal year being carried forward are the same as the opening balances in the new fiscal year. i.e Closing balance of G/L for year FY = Opening balance of G/L for year FY+1
- The balances of the profit and loss accounts are cumulated and transferred to the corresponding balance sheet account for annual net profit or loss. This ensures that closing balances and opening balances of the profit and loss accounts are always zero.
To make the opening balances of G/L accounts available before balance carry forward is completed, you need to perform balance carry forward in two steps:
Step 1: Carry the G/L account balances forward
This accomplishes the following:
- The balances of the balance sheet accounts are carried forward to the same accounts in the new fiscal year.
- The balances of the profit and loss accounts are cumulated and transferred to the income statement closing account. This ensures that the closing and opening balances of the profit and loss accounts are zero.
Once you have completed Step 1, you can continue to make postings to the fiscal year being carried forward. However, be aware that such postings increase the number of journal entries that need to be carried forward because change documents have to be posted in addition to the journal entries themselves. Change documents update the closing balances in the fiscal year being carried forward and the opening balances of the affected G/L accounts in the new fiscal year.
Step 2: Calculate and carry forward profit/loss
This step is the last activity in your balance carry forward process. You perform this step after all postings to the fiscal year to be carried forward have been made.
You can only perform this step once you have completed Step 1 in an update run.
Step 2 posts the balance of the income statement closing account to the balance sheet item Equity either of the annual net profit account or the annual net loss account, depending on whether it is a debit or credit balance at the company level. The balance of the annual net profit account or of the annual net loss account is then carried forward to the new fiscal year.
In order to execute the Balance carry-forward in
Step 1 - Last allowed step for period 012 in year should be 990 – Closing balance or higher (i.e 990 or 991)
Step 2 - Last allowed step for period 012 in year should be 991 – Profit and loss calculation of retained earnings and First allowed step for the period 001 in next year must be 001 – Opening balance.
You can find more information about the different closing steps and its use in the help center document : Closing Steps
After Performing Both the steps in update mode, you can block the period 012 by following below steps
- General ledger work center
- Set of books and assigned companies view
- Click on Open and close period
- Select the row
- Click on Close period
- Click on Save
Now You can close the fiscal year.
- General ledger work center
- Set of books and assigned companies view
- Click on Edit Fiscal Year
- Select the row
- Click on Close Year
- Click on Save
Regards,
Harshal
