As financial year-end approaches for most businesses, let’s look at the necessary setup and steps for running year-end processes in Microsoft Dynamics 365 Business Central.
You can also read the month-end tasks to close the accounting period, which should be done prior to closing the year-end.
When you close the period at the end of the year, the system transfers earnings from Current Year Profit & Loss to the Retained Earnings account in the balance sheet and reduces all Profit & Loss accounts to zero.
If you close the income statement and find you have adjustments or additional transactions to post, you can post those transactions by opening up the posting dates and you can then run the year-end close process as many times as you need. When Dynamics 365 Business Central creates the year end close journal, it uses a special date format with a ‘C’ in front of the date, for example C30062025.
Steps to perform year-end closing in Business Central:
STEP 1. Close the Fiscal Year the Using Accounting Period function
Use the search function find the Accounting Periods page and select from the menu.
On the Accounting Periods page, select Process then Close Year.
The fiscal year is closed and the Closed and Date Locked fields for all the periods in the year are selected. The fiscal year cannot be opened again, and you cannot remove the checkmark from the Closed or Date Locked fields.
NOTE: You cannot close a fiscal year before you create a new one. So, whilst in the Accounting Period Page, you should also check that you have enough New Accounting Periods ready to go, especially if you are using deferrals!
(Tip – Use the “Create Year” function instead of the “Close Year” function.)
STEP 2. Using Close Income Statement option to generate year-end closing entries
This batch job sums up all “Income Statement” accounts and creates a journal which will return each Income Statement account to zero as at the end of the fiscal year. These entries are populated into a journal batch which you specify as well as the retained earnings account to post the net result too. When you post the journal, an entry is posted to each income statement account so that its balance becomes zero (as at the special “C” date) and the year’s net profit/loss is transferred to the balance sheet.
Using search enter ‘close income statement’ and select the related link. Fill in the Options box prompts, complete each option as required, and click OK. The journal will be created.
Options
- Fiscal Year Ending Date – This date is used to determine the closing date and it will automatically populate with the last date in the latest closed fiscal year.
- Journal Template – Select the general journal template that the entries are placed in (normally GENERAL).
- Journal Batch – Select the general journal batch that the entries are placed in (i.e. YEAREND).
- Document No. – If the Journal Batch has a number series assigned, then the Document Number will be populated according to the batch. If your Journal Batch does not have a number series then you can manually enter your preferred Document Number i.e YE2025
- Retained Earnings – Select the retained earnings account that the batch job posts the net result to
- Post to Retained Earnings – Specify if the resulting entries are posted with Retained Earnings account as a balancing account on each line (Details) or if retained earnings are posted as an extra line with a summarised amount (Balance).
- Posting Description – Specify the description that accompanies the posting, the default text is Close Income Statement.
- CLOSE BY – This is to determine how many entries are created by the batch job with options:
- Business Unit Code – If this field is selected and the company is a consolidation company and separate entries are to be created for each business unit.
- Dimensions – If you want an entry to be created for each dimension value combination used in the general ledger account. Any dimensions you use across Income Statement accounts should be selected here.
- Inventory Period Closed – Select if you want inventory period with ending date equal to or prior to the last date of the accounting period to be closed when you run the batch job.
NOTE: If you do not want to close by business unit or dimension, only one entry is created for each account.
STEP 3. Review the general journal and post the journal with offsetting equity account
After you run the Close Income Statement batch job to generate the year-end closing entries, you need to open the journal batch you specified and review those entries and post.
Date with a “C”
You will see all entries with this batch will have a date starting with “C”. This shows these are closing entries and also allow financial reports to optionally exclude the closing entries. This allows you to run income statements reports across multiple years and exclude the closing entries. If you include the closing entries, the Income Statement accounts should be zero!
NOTE: If an error is detected, an error message will display, you will need to review the error and take appropriate action. If you need to make some changes you can delete the lines in the batch, complete your changes and re-run the Close Income Statement function again until you are happy with the result and ready to post your retained earnings.