End of Period and End of Year Procedures (General Ledger)
The Cadzow General Ledger Package for MS-DOS posts all entries, regardless of date, into the “current” period. Reports can be produced for the current period, the current year and last year. Therefore it is important to follow an end of period procedure to provide meaningful period reporting.
The procedure is:
- Complete all posting entries.
These could be entries from other systems, such as Cadzow 2000, or manual entries.
Generally the only non-trading figures that need to be entered on a monthly basis are closing stock figures, if you wish to do so. The figure is debited to stock on hand in the balance sheet, and credited to closing stock in the trading statement(s). When the period is closed, the system performs the necessary entries to convert the period's closing stock into the following period's opening stock.
(See below for discussion on unbalanced closing stock entries.)
- Complete the bank reconciliation (if required).
Printed copies of the bank reconciliation are seldom required, since the bank reconciliation is effectively a cumulative process. If it is correct today, it doesn't matter what it was like in the past and most likely you will not refer to it again.
Note that it is common for bank statements to be issued that span calendar months. In this case, you should reconcile up to the last day of the calendar month and no further. Continue the remainder of the bank statement in the following month.
See below for discussion on cleaning up unreconciled entries from the previous year.
- Print any period reporting required.
Although period reports can only be produced for the “current” period, there is a not a great need to produce copious quantities of printed material, such as audit trails and ledgers. Audit trails and ledgers for the full year can be produced at any time, and last year's ledger can also be accessed. So any finely-grained examination you need to undertake later can still be done without recourse to printed reports. In most cases the appropriate reporting is simply a Current/YTD financial statement for management. This is available under Menu Three Option 5 (Financial Statement Current/This Year).
- Back up.
The most convenient way to back up is using Menu Eight Option 6 (Backup Client Data To Floppy Disk), because it provides a mechanism to easily restore the same data. However, this option can only back up to drive A: so for very large client files it may be necessary to use an alternate method (such as writing/burning the entire contents of the \GL, \GL1, \GL2, \GL3 and \GLPROG folders to a CD. Note not all systems have \GL1, \GL2 or \GL3 folders.).
Backups should be conducted whenever significant work has been done to the General Ledger, but it is most important to perform a backup prior to a period closure. If a backup is done just after finishing all the entries and completing the bank reconcilation, it becomes much easier to roll back if that is required.
So while it is good practice to back up every day or every few days, a monthly backup is particularly critical and it should not be overwritten. Always use fresh disks for a monthly backup as this will be a long-term archival copy. Daily backups can be recycled.
- Close the period.
If a period is being closed, use Menu Four Option 1 (Close The Current General Ledger Period).
If the year is being closed, use Menu Four Option 2 (Close Year). When closing the year, it is not necessary to also close period 12. It is possible to close period 12, but nothing happens.
- Continue the new period.
Common End of Period and End Of Year Issues
Stock on Hand not balanced
Closing stock adjustments, for both periods and years, consist of a credit entry to “closing stock” in the trading statement(s) and a debit entry to “stock on hand” in the balance sheet. In the standard chart of accounts, several closing stock (trading statement) accounts are defined, but only a single stock on hand (balance sheet) account is defined. All these accounts must add up; that is, the debit must equal the sum of the credits. If not, the difference is posted to the Default Suspense (Error) account defined under Menu One Option 5 (Setup/Change Transfer Directives) after the period/year closure.
Incorrectly Configured Stock Accounts
At the end of the period, stock on hand in the balance sheet is set to zero and closing stock becomes opening stock in the new period. However, these closing/opening entries require the three accounts, Opening Stock, Closing Stock and Stock On Hand, to be correctly configured. The correct settings are:
|Account||Description||Account Type||Related or Overdraft Account|
|17101||Stock on Hand||3|
If the accounts are not correct, after the closure the trial balance will contain (assuming closing stock of $350,000):
|17101||Stock on Hand||350000.00|
|22000||DO NOT USE "SYSTEM A/C"||350000.00|
This may be corrected after the closure with the following journal entries:
Old Bank Entries not brought forward in Bank Reconcilation
When the year is closed, entries not marked off from the bank reconciliation are retained and appear in the bank reconcilation in the new year. However, entries which were outstanding from the prior year cannot be kept, and they disappear from the bank reconcilation after the year has been closed.
Therefore before closing, the procedure is:
- Identify the entries which belong to the previous year.
- Repost these entries as pairs contra'd to the Suspense account.
For example, if a cheque for $7,207.02 dated 20/04/YY reference 120669 is not presented, and the bank account code is 16010, post two entries as follows:
Note the two entries cancel each other out.
- In Menu Two Option D (Bank Reconciliation), mark off the original entry and the credit transaction just entered. This leaves the recently posted debit entry.
This has the effect of replacing the older entry with a newer entry. There is no effect on the ledger and no effect in the bank reconciliation.
Missing Subsidiary Accounts in Multiple Company Client
In a multiple company client, each account must have exactly the right number of sub-accounts, even if you do not post to all of them. For example, if you have 8 companies in the chart, each account must have sub-accounts numbered 01 to 08. If you have an account with missing sub-accounts or with no sub-accounts, when the period is closed certain amounts will have nowhere to go and will end up in the error account (the Default Suspense).
If the procedure to create new accounts in multiple companies automatically has been used, this does not occur.
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