End of Year - A Case Study

End of Year - A Case Study

First Year of Operation

  1. Current Year - Active
  2. Previous Year - Inactive
  3. Archive - Inactive
Opening Balance in the Retained Earnings account in the Current Year is (175,068.22).



Second Year of Operation

  1. Current Year - Active 
  2. Previous Year - Active
  3. Archive - Inactive
Data set of Current Year is moved to the Previous year and the net Profit/Loss of the Current Year is calculated and posted as balance brought forward in the Profit & Loss (Year) in the current year as shown below.



After all postings are complete and audit adjustments are entered in the previous year, a journal entry is required to be posted in the Previous Year to transfer the amount in the Profit & Loss (Year) account to the Retained Earnings Account. If this entry was not posted by user, the system will prepare this entry during the EOY process. Both the Retained Earnings and the Profit & Loss Account for the Year are identified in the System Control Accounts.

148,271.76 - Dr - Profit & Loss (Year) 
148,271.76 - Cr - Retained Earnings 

Notes
This value should reconcile with the audit accounts.

On posting of this journal and running the Update Opening Entries, the Profit & Loss for the Year should not have any opening balance in the Current Year. This will confirm that the Trial Balance of the Previous Year reconciles the audit accounts. The accounts balances will look like below



Info
If the above journal posting is not done by the user, when processing the next EOY the system will warn you that a balance brought forward exists in the Profit & Loss (Year) account and will prompt the user to transfer that balance to the retained earnings.

Third Year of Operation

  1. Current Year - Active
  2. Previous Year - Active
  3. Archive - Active
The Previous Year Data is move to the Archive while the Current year Data is moved to the Previous year and the net profit/loss of Current Year is calculated and posted as a balance brought forward in the Profit & Loss (Year) in the New Current Year.



After all postings are complete and audit adjustments are entered in the previous year, a journal entry is required to be posted in the Previous Year to transfer the amount in the Profit & Loss (Year) account to the Retained Earnings Account. If this entry was not posted by user, the system will prepare this entry during the EOY process. Both the Retained Earnings and the Profit & Loss Account for the Year are Identified in the System Control Accounts.

451,420.41 - Dr - Profit & Loss (Year) 
451,420.41 - Cr - Retained Earnings

After this journal the accounts balances will look like below