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Coworking:End Year Close

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Contents

Introduction

The "Close Year" process allows to close a fiscal year. This process also permanently closes all the periods of the year (standard ones and adjustment one).

It is important to remark that it is not required to close the standard periods of a year prior closing that year, however it can help to keep tracking of the periods of the year already reviewed and closed.

The close year process requires that the next year exists and its first period is opened.

Once a year is closed, the status of that year and all its periods can be reviewed in the Open/Close Period Control window.
As already mentioned, all the periods of the year are now shown as "Period Status"="Permanently Closed", that means that it is not possible to post any transaction within that year anymore unless the Undo Close Year process is run for that year.

"Close Year" process creates the following accounting entries:

1. The "Profit and Loss Closing" entry.

2. The "Closing" entry or "Balance Sheet Closing" entry.

Finally, if a Retained Earnings account is specified for the general ledger configuration, an additional entry dated on the last day of the year is created.
This entry moves the Income Summary account balance to the "Retained Earnings" account.

3. And the "Opening" or "Balance Sheet Opening" entry.

End-year close process example

This example describes the "2012 end-year closing" process of a sample legal with accounting organization named "Oat Biscuit Company".
Please note that the "Oat Biscuit Company" configuration is described in the Business Setup section of the Quick Guide. The account tree structure used to generate the balance sheet and income statement is the one provided by the Generic Chart of Accounts module.

This article describes the end-year closing process intentionally keeping the organization's activity as simple as possible.

The company in this example started its activity prior to 2012, therefore a G/L Journal set as "Opening" can be created to record the 2012 opening entry and get it posted to the ledger.

Opening Entry.png

To make it simple, the company in this example executed below detailed "regular" activities which created the corresponding "regular" journal entries in the general ledger:

  1. An AR Invoice (2012 Oat Biscuit Revenue)
  2. An AP Invoice (2012 Oat Biscuit Cost of the Goods Sold)
  3. A G/L Journal to post Interest Income (2012 Other Income)
  4. A G/L Journal to post Land Depreciation (2012 Depreciation)
  5. and a G/L Journal to post Marketing and Staff Salaries (2012 Operating Expenses)

JournalEntry Regular.png

Let's imagine that "Oat Biscuit Company" closes the standard periods as soon as each period is over and that is done even for the last standard period which is "December 2012".

Oat Biscuit Company's accountants can use the "13th Period" to post accounting adjustment to the ledger through the posting of G/L Journal/s, prior running the "Year Close" process.

Once 2012 is over and ready to be closed, the company in this example can execute the 2012 "Close Year" process from the End Year Close window.
The process button "Year Close" runs the end-year close process for "Oat Biscuit Company" organization.

2012 Close.png

Reverse Permanent Account Balances set to "Yes"

Openbravo creates below detailed "closing entries" if the "Reverse Permanent Account Balances" check-box of the Organization's general ledger is set to "Yes" before running the "Close Year" process.

Note that below accounting entries can also be reviewed in the "End Year Close" window in the Accounting Tab.

The organization in this example can launch the 2012 Balance Sheet and the 2012 Income Statement reports from the Balance Sheet and P&L structure window:

2012 Balance Sheet:
2012BalanceSheet.png

2012 Income Statement:
2012P&L.png

Reverse Permanent Account Balances set to "No"

Openbravo creates below "closing" entries if the "Reverse Permanent Account Balances" check-box of the Organization's general ledger is set to "No" before running the "Close Year" process.

Note that below accounting entries can also be reviewed in the "End Year Close" window in the Accounting Tab.

The organization in this example can launch the 2012 Balance Sheet and the 2012 Income Statement reports from the Balance Sheet and P&L structure window. It will get the same Balance Sheet and Income Statement as the ones showed for the "Reverse Permanent Account Balances set to "Yes" scenario.

End Year Close

In the End Year Close Window all the Years previously created in the Fiscal Calendar Window are shown. Besides those years can be closed in this window.

The records shown in this window are filtered by their "Status" and the "Organization", by showing only the Years which are not closed yet and belongs to the Organization in which the User is logged. These filters can be removed by clicking in the funnel icon.

This Window shows two Tabs. The first Tab shows all the existing Years. Once selected a record in this Tab, the lower tab shows the related Accounting entries, meaning the closing entries generated by the Close Year process as well as the corresponding opening entries of the next year.

This way it is easier and quicker to see the Accounting generated when a Year is closed. More information can be found in the Accounting Tab below.

The way to Close a Year is:

Once done, Openbravo informs that the process has been completed successfully.

All the Periods for that Year and that Organization will be permanently Closed. The way to Undo the Close of the Year is the same, but clicking on Undo Close Year.

2012 Close.png

As shown in the image above, the main fields in this Window are:

Undo Close Year

If a year (i.e 2012) is closed it will not be possible to do any posting within that year unless the "Undo Close Year" process is run for that year.

This process opens the year and all the periods of the year. It also reverts all the ledger entries posted by the end-year close process; therefore closing/opening entries are not shown in the Journal Entries Report anymore, unless the end-year close process is run once again for the year.

Accounting

In the Accounting Tab of the End Year Close Window, all the Accounting entries generated when a Year is Closed or when it is Opened are shown, grouped by Account. This Account entries can be:

This way is easier to review the Accounting entries made in the Closing Year Process.

2012 AcctClosingEntry.png

As shown in the image above, the main fields in this Window are:

For explaining this Tab, it is better to follow the same example as in the Introduction section and show how this Tab presents the results.

Reverse Permanent Account Balances set to "Yes"

Openbravo creates below "closing entries" if the "Reverse Permanent Account Balances" check-box of the Organization's general ledger is set to "Yes":

Reverse Permanent Account Balances set to "No"

Openbravo creates below "closing" entries if the "Reverse Permanent Account Balances" check-box of the Organization's general ledger is set to "No":



Full list of End Year Close window fields and their descriptions is available in the End Year Close Screen Reference.

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