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 Calculated Earnings to the Retained Earnings account in the balance sheet and closes all income statement accounts.
You can run the year-end close process multiple times. Dynamics 365 Business Central has the ability to run the Close Income Statement as many times as required. When the journal is created, it posts with a ‘C’ in front of the date, for example C30062019.
Steps to perform year-end closing in Business Central:
STEP 1. Using Accounting Period option
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.
STEP 2. Using Close Income Statement option to generate year-end closing entries
This batch job processes all general accounts of the income statement type and created entries that cancel out their respective balances. Each entry is the sum of all general ledger entries on the account in the fiscal year. These entries are placed in a journal in which you need to specify a balancing account and retained earnings account in the balance sheet before posting. When you post the journal, an entry is posted to each income statement account so that its balance becomes zero and at the same time the year’s result 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 process to close the income will proceed.
- 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.
- Document No. – If you filled in the Journal Template field and the Gen. Journal Batch field, the batch job automatically fills in this field with the next available number from the No. Series for the journal batch. You can also fill in this field manually.
- Retained Earnings – Select the retained earnings account that the batch job posts to, you will need to adjust in the closing entry once the batch job has created the entry if there are multiple retained earnings accounts or dimensions are used in combination.
- 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.
- Business Unit Code – Select if you want an entry to be created for each Business Unit Code
- 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 consolidated company separate entries are created for each business.
- Dimensions – If you want an entry to be created for each dimension value combination used in the general ledger account.
- 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 use the Close Income Statement batch job to generate the year-end closing entries, you need to open the journal you specified in the batch job, 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 exclude the closing entries. This could allow you to run income statements reports across multiple years and exclude the closing entries.
NOTE: If an error is detected, an error message will display. If the posting is successful, the posted entries are removed from the journal. After posting is complete, an entry is posted to each income statement account so that its balance becomes zero and the year’s result is transferred to the balance sheet.
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Katrine Ng is a Senior Solution Specialist at EBS and has a successful track record in project managing, implementing and delivering high-quality solutions. She likes to help customers translate their needs into business and user requirements. She has worked with Microsoft Dynamics 365 Business Central and Dynamics NAV in Australia and Malaysia since 2003.