Close Books
After you ensure that all your accounts are up-to-date, and you allocate costs and income, then you can close the books for a fiscal year or period.
This process includes three main tasks:
Closing the accounting period,
Registering prior-year entries
Transferring balances from the income statement accounts to the balance sheet
A fiscal year is defined as one or more open periods listed in the Accounting Periods window. A typical fiscal year contains 12 periods of one month each, but you can also choose another method of defining a year.
When you close a fiscal year, you must enter a number of administrative transactions (such as prepaid and accrued items). These transactions are called adjusting entries. There are no special rules for posting these entries, and they (like other entries) contain a check mark in the Prior-Year Entry field if they are posted on a date in a closed fiscal year.
After a fiscal year has been closed and all prior-year entries have been posted, the income statement accounts must be closed and the net income for the year must be transferred to an account under owners' equity on the balance sheet. Use the Close Income Statement batch job for this purpose. The batch job processes all general ledger accounts of the type Income Statement and creates entries that reverse their balances. These entries are placed in a journal from which they can be posted. The batch job does not post them automatically, except when an additional reporting currency is used. When an additional reporting currency is used, the batch job posts directly to the general ledger.
When the batch job is finished, select the general journal that contains the closing entries. If you did not specify a retained earnings account in the batch job, then enter one line with a balancing entry that posts the net income to the correct general ledger account under owners' equity on the balance sheet. Finally, post the journal.
The following table describes a sequence of tasks, with links to the topics that describe them. These tasks are listed in the order in which they are generally performed.
| To | See |
|---|---|
Learn about closing a year. |
|
Close the periods that make up a fiscal year. |
|
Transfer the year's result to an account in the balance sheet and close the income statements. |
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Post the entries generated by the Close Income Statement batch job. |