What are the Year End procedures? ▾
1) Create a new fiscal year in Nominal ledger >> Settings >> Fiscal Years.
2) Update Reporting Periods in System Module’s settings.
3) Add new Number Series (if in use) for the new fiscal year in modules that you use and the ones that are affected.
4) Book result of the year as one transaction.
5) Following year move that result to profit/loss carried forward, dividends or whatever has been decided within the company.
Following text is a written with a technical approach. Necessary local legislation and regulations must always be followed. In technical matters it is recommendable get help from a certified HansaWorld partner.
At the end of a fiscal year all businesses prepare their year end balances with the purpose of knowing their financial position resulting from their daily operations. To prepare this year end balance and start a new fiscal period it is necessary to close the Profit and Loss Accounts. This means that all Income and Expense Accounts must to be closed on the last day of the fiscal year.
Spreading income and costs over time
To get a result that is as accurate as possible, some income and expenses should be spread over the periods to which they relate, before closing the year. In the following cases you might have to spread income or expenses over time.
1) When buying assets for example a truck or machine.
The whole value of a machine is paid when buying it. Every asset that you use loses value over time due to its getting older and being used. This means that the value of every asset decreases every year. This is called depreciation and it is a cost that is split over a certain period of time, for example a five year period (20% per year). In this case the whole value of the machine will be posted to the Asset Account for machines (debit) at the time of purchase. Before closing the year, you should post 20% of the value of the machines to the Asset Account Depreciation of Machines (credit). This should be balanced by posting a cost to the Cost Account for depreciation.
2) Spreading costs for Inventory Items over time.
Items that have been bought during the year are connected to purchase costs (price, transportation, assembling…). These purchase costs have to be posted to a Cost Account for Items. If all the items that have been bought during the period have also been sold, the cost of your account for sold items represents the actual cost of all items you have sold. If however not all items have been sold, the cost of the unsold items must be moved to a Stock Account before closing the year. This is the starting balance of your inventory value in the beginning of the next year.
3) Expenses that have been posted and paid, but that are not supposed to be costs for the year when they are posted – prepaid costs.
4) Income that has already been posted and paid, but that is not supposed to be income for the current fiscal year – prepaid income.
5) Income that is not yet posted and not paid but that should be an income for the current year – accrued income.
6) Expenses that are not yet posted or paid that that should be costs for the current fiscal year – accrued cost.
Profit/Loss: After you have entered all the year end transactions, you can calculate the profit for the year.
A balance sheet is often described as a "snapshot" of the company's financial position on a given date. A modern balance sheet usually has three parts: assets, liabilities and equity. The Balance Sheet has also a debit and a credit side. The Asset Accounts are only written on the debit side, while the Equity and Liabilities Accounts are on the credit side.
Year End Simulation - a quick and easy way to do the year end by running one simple maintenance routine. You should only do this once all the other year end journals have been passed (e.g. adjustment accruals etc).
1. In the Fiscal Years setting, add a new row for the new year.
2. If you are using Number Series, add number sequences for the new year in the Number Series – Simulations and Number Series – Transactions settings. If necessary, update Number Series Defaults setting in the System module and the ‘Number Series’ tab in each Person record so that the next Transaction Number will be taken from the new Number Series.
3. Go to the Nominal Ledger Module and open the Routines from the Navigation Center. Select Maintenance and then Year End Simulations.
4. Select an account using Paste Special. Normally you would create an account that is at the end of the Balance Sheet section of the Chart of Accounts specifically for this maintenance routine.
5. Remaining in the Nominal Ledger module, open the Simulation register. You will find that three simulation records have been created.
6. You can now inspect the simulations. When you are satisfied, you can create NL transactions from the simulations by highlighting them in the “Simulations: Browse” window and choosing “N/L Transactions” from the Create menu. You may need to tick the Skip Object Type Control for Year End Records option in Transaction Settings first. This closes the Profit & Loss Accounts.
