At the end of the Financial Year after all the postings have been made for the previous year and the last month end has been completed, it is standard practice to do the financial year closing process.
There are other pre-requisites you need to complete before starting this process, Microsoft has actually a page describing the steps click the below link to view the same.
Note: I did not find Purchase order year end process in the Microsoft checklist, but I suggest you run this also before running closing (only if you use budgeting in your POs).
Now back to the year ending standard process, It does the following:
1) Creates the opening balances for the new year
2) Moves the balance of all the Profit & Loss main accounts to the Prior year profit/loss or retained earnings account
3) Resets the Profit & Loss Main accounts to 0
Q1. What is the logic the system uses to move out the P&L balances?
Ans. It is actually based on the main account type field, this field determines what goes to the retained earnings account and determines what goes forward to the next period.
If type is “Profit and loss, Revenue or Expense” it will go to retained earnings and reset as 0 as opening balance. If type is “Balance sheet, Equity, asset or liability” it will go as opening balance to next year.
Q2. Does the Main account close field effect the closing?
Ans. Main account close field does not effect closing as such, it just displays in the closing sheet the 3 columns “Result”, “Balance”, and “Capital” , it does not influence the year end process or the opening transactions that Dynamcis AX generates.
Q3. Does the Main account category field effect the closing?
Ans. No it has no effect.
Before you run the year close you need to review the parameters in General Ledger that effect the close as these cannot be selected on the year close form.
The best practice setup is shown below:
Let us go through each of these options and what would happen if we use them:
- Delete close-of-year transactions during transfer: This deletes any previously made closing vouchers for that year and re-posts a new closing voucher. I prefer not deleting the previous closing records so that I can see the adjustments made if we have multiple closing. The end result will be same so its a personal preference.
- Create closing transactions during transfer: If this is checked the system makes some transactions of “closing type” but removes the values in column “closing balance” when you view the Trial balance. Best practice is have this unchecked as we should show every years closing balance.
- Set Fiscal year status to closed: Best practice is not to have this checked as most users put a hold on the previous periods and do not use the closed status.
- Voucher number must be filled in: Best practices dictate you make sure this is ticked and give a logical name like FY<current_year>CL, this means Financial Year 2018 close.
Q4. How many times can I run the closing process?
Ans. You can run them as many times as required.
Once you have set the parameters you are ready to start the year end process.
The year end menu point can be found at:
General Ledger–>Periodic–>Fiscal Year Close–>Opening Transactions
Now you should see the closing form.
Please do the following:
- Enter in the “end date field” the last day of the year you want to close.
- Then select closing–>opening in the “Balance accounts” field.
- Select the prior year profit/loss account or retained earning account in the “main account for transfer or year end result. This is where the sum total of the Profit and loss main account types will reside after close.
- Enter a voucher number for the closing voucher as we need to identify the system posting entries. System will not allow you to duplicate any vouchers (even deleted ones).
- Go to Financial dimensions tab and make sure all financial dimensions are ticked (see below image) so we transfer all balances with their respective financial dimensions.
- Next go to the batch tab and make sure this is ticked. The year end process can take a lot of time depending on the number of transactions you do not want to do this without making a batch. Also when this task is made as a batch you can see the exact progress.
Once you click ok, the process will start and once over you should see new opening balance for the new year in your Trial balance.
Warning: In some strange cases when usually you do multiple closes for the same year, you might find a doubling up of Opening balance. If you check the vouchers and add everything up and indeed verify the posting have been doubled due to closing, then no need to panic just run the closing but this time make sure to use the below parameters:
What this will do is that the system will delete all the previous year close for that year. This is like an undo button for all the closes you may have done for that year. After verifying that the previous closing vouchers have been deleted, you will need to re-run the normal close process.
In case your case is that the vouchers have not doubled posted but still the Trial balance is showing incorrect figures you will need to run the “Rebuild balances” function in
General Ledger–>setup–>Financial Dimensions–>
Financial Dimensions Sets
Thats all folks. Keep on DAXing 🙂