Closing the Year for General Ledger

CAUTION: This procedure creates debit and credit entries to close out all revenue and expense accounts for the date range specified. These entries are placed in the General Journal. You must then post the General Journal to the General Ledger.

NOTES:

To close the year for the General Ledger:

  1. On the Year End Closing Journal Entries form, select the general journal to close.
  2. In the Income Summary Account field, select the "Retained Earnings" account for the year end closing transaction. The account's type must be set up in the Chart of Accounts as Owner's Equity.
  3. (Optional) Change the Fiscal Year Start Date and Fiscal Year End Date.
  4. To have the system first delete all journal entries for this journal before generating the year-end transactions, select the Delete Current Journal Entries check box.

    This refers to the existing entries in the General Journal only. Do NOT change any of the references generated by the system on the entries in the General Journal. If this check box is selected, all journal transactions along with any associated text are deleted when the transactions are generated, prior to creating the closing transactions.

  5. To have the system clear the unit code balances in the revenue and expense accounts as well, select the Unit Code Detail check box.

    Clearing this check box leaves the balances in the unit codes, and carries them forward.

  6. Click Process.

NOTE: You can close fiscal years an unlimited number of times. If you have closed the fiscal year and need to enter transactions for that year, you can post the transactions and then run the year-end close again.

Example: G/L Year End Closing

Suppose the following entries were the financial activity for a company for the fiscal year of 01/01/2002 to 12/31/2002 using the following accounts:

Account     Description
10000 Assets
20000 Liabilities
30000 Owner's equity
40000 Revenue
50000 Expense

Example of Ending Balances (12/31/2002)

Account     Balance
10000 100,000.00
20000 (64,500.00)
30000 (20,000.00)
40000 (23,500.00)
50000 8,000.00

Example of Year End Entries

Account     Balance
30000 15,500.00
40000 23,500.00
50000 (8,000.00)

Example of Ending Balance (12/31/2002) after Year End Balance

Account     Balance
10000 100,000.00
20000 (64,500.00)
30000 (35,500.00)
40000 00
50000 00

NOTE: No entries were generated for Accounts Receivable of Cash, because they are asset accounts. Only revenue and expense accounts are closed out.

Related Topics

General Ledger Steps

Year End Closing Journal Entries