Closing the Period

These procedures should be performed when you wish to "close out" a General Ledger period.  The Stream V General Ledger allows the user to have multiple open accounting periods at any one time.  Therefore the current period does not have to be closed before processing can begin in the next period.  An operator must perform the End of Period Operational Procedures at the end of each period, but the closing of the General Ledger may be done at a later date. 

A General Ledger period is closed by making a manual journal entry to transfer the amount of net profit or loss for the period (as shown on the Income Statement) to the Equity section of the Balance Sheet.  This Journal Entry is made using two specialized General Ledger Accounts.  These two specialized accounts must be present in order for the operator to close a General Ledger period.  These accounts are Current Earnings (Autopost #801) and Net Income (Autopost #800).  The Current Earnings account has an account type of 40 (Equity) and it's total is listed in the Equity portion of the Balance Sheet.  The Net Income account has an account type of 80 (Non-Operating Income & Expense).  The Net Income Account does not appear on the Income Statement or Balance Sheet but does appear on the Trial Balance.

1.  Make sure that all prior G/L periods have been closed, and that the G/L is in balance at the end of the last closed period.

2.  Print Trial Balance YTD (through last closed period) and verify that it is in balance.

3.  Print Balance Sheet YTD (through last closed period) and verify that it is in balance.

4.  Print Income Statement YTD (through last closed period) and verify that the Net Profit on YTD Income Statement (through last closed period) matches amount of Current Earnings shown on Balance Sheet (through last closed period).

5.  Make sure all End of Period Sub-ledger Reports have been printed, and that all End of Period  Operational Procedures have been completed. (see section III above).

6.  Print a YTD Trial Balance, (through period to be closed) and Check the Trial Balance to make sure that the G/L is in balance.  If an out of balance condition  exists, the out of balance condition must be corrected before closing the period.

7.  Compare the YTD Trial Balance account balances to the end of period reports such as the A/R Aging, Open Accounts Payable, etc. and resolve and/or correct any discrepancies that are found.  If corrections are required, they should be made, and the Trial Balance should be reprinted.

8.  Print Pre-Closing Period To Date Financial Statements.

1.  Print the Income Statement for the period to be closed.

2.  Print the Balance Sheet selecting the period to be closed.

9.  Check the current period-to-date financials as follows.  The difference between the total assets versus the total liabilities and owners equity on the Balance Sheet for the period to be closed should be equal to the Net Profit on the Income Statement for the period to be closed.  In other words, the Balance Sheet should be out of balance by exactly the amount of Net Profit shown on the Income Statement for the period. If the Balance Sheet is not out of balance by the amount of net profit from the Income Statement, then a prior period may not have been closed properly, or transactions may have been posted to a prior period after it was closed.  This condition should be corrected before attempting to close the current period.

10. Close the period - To actually close the accounting period, a journal entry must be made in the period to be closed to post the amount of net profit from the Income statement to the Net Income (G/L Autopost #800) and Current Earnings (G/L Autopost #801) accounts.  This entry moves the net Income Statement activity for the period to the equity section of the Balance Sheet.

The Journal Entry to post a net profit for the period is as follows.  The Entry should be posted to the period to be closed.

              (Debit) Net Income   $ XX.XX   

                        (Credit) Current Earnings   $ XX.XX

             (Where $ XX.XX = Net Profit from Income Stmt)

The Journal Entry to post a net loss for the period is as follows.

              (Debit) Current Earnings  $ XX.XX   

                       (Credit)       Net Income   $ XX.XX

              (Where $ XX.XX = Net Profit from Income Stmt)

11. Print Post Closing Financial Statements, check that the Trial Balance and Balance Sheet are in balance and retain the reports as backup.   

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General Ledger Reference Information