At the end of every fiscal year, accounting people often ask us how to close the books in Microsoft Dynamics NAV. It is a fairly straightforward process, but because it only happens once a year, users often forget what to do. In this blog post, we outline both high level and detailed instructions for closing the fiscal year and income statement in Microsoft Dynamics NAV.
Summary of How to Close the Fiscal Year and Income Statement in Microsoft Dynamics NAV
The first step is to close the fiscal year. The second step is to close the Income Statement. Both functions are located under the Financial Management menu, and then under General Ledger, Periodic Activities, Fiscal Year.
Also, make sure you post the journal entries after you run the Close Income Statement function. It does not post automatically.
Once the Income Statement is closed, NAV still allows users to post into the closed year. Therefore, you will need to make sure the Posting Date ranges are restricted to only allow posting in the next period. If someone does happen to post into the closed year, you will just need to run the Close Income Statement process again.
Detailed Instructions for Closing the Fiscal Year and Income Statement in Microsoft Dynamics NAV
At the end of each fiscal year, the income account balances must be transferred to a balance sheet account. This is performed by the Close Income Statement batch job in the program. However, before you can run this batch job you must have closed the accounting periods for the fiscal year that will be closed. You cannot use the batch job for open accounting periods.
Closing a Fiscal Year
Use this procedure to close a fiscal year:
- On the Financial Management menu, click General Ledger, Periodic Activities, Fiscal Year, Accounting Periods.
- Click Close Year.
- The program automatically selects the oldest open year. A message will inform you of the year that will be closed and seek confirmation that you wish to continue.
- Once the message has been confirmed by clicking Yes, the Closed and Date Locked fields of all periods in that fiscal year will be updated with a checkmark that cannot be removed. Therefore, the period lengths cannot be changed.
You can close the accounting periods of a fiscal year even though all entries for the fiscal year have not been completed. Because you can still post to closed accounting periods, the balances will be updated automatically. Every entry posted into a closed year will be marked as a closing entry by having a check mark placed in the Prior-Year Entry field. Every time you post to a closed fiscal year, you can run the Close Income Statement batch job to transfer the balance to the balance sheet.
Note: When you close the fiscal year, the program will lock the period-length, but it will not be blocked against entering and posting entries. You can only stop entry to a specific period by setting a date range against user accesses. You prevent posting by using the Allow Posting From and Allow Posting To fields in the General Ledger Setup window or in User Setup.
Transferring the Income Balances – Close Income Statement
The Close Income Statement batch job transfers the income account balances to an account in the balance sheet and closes the income statement accounts. The batch job creates lines in a journal, which you can then post.
The batch job processes all G/L accounts of the Income Statement type and creates entries that cancel out their respective balances (that is, each entry will be the sum of all the G/L entries on the account in the fiscal year that is being closed). These closing entries are placed in a journal, in which you must specify a balancing account in the balance sheet before posting. When the journal is posted, an entry is posted to each income statement account so that its balance becomes zero and an opposite amount is transferred to the balance sheet.
You must post the journal yourself; the batch job does not post the entries automatically. However, if you are posting with an additional reporting currency, the program will post automatically because this guarantees the correct posting of rounding differences.
The date on the lines that the batch job inserts in the journal will always be a closing date for the fiscal year. The closing date is a fictitious date between the last day of the old fiscal year and the first day of the new year. It is designated as a closing date by having the format Cmm/dd/yy. The advantage of posting on a closing date is that you maintain the correct balances for the ordinary dates of the fiscal year.
Notes Regarding Closing Dates
Do NOT change the closing date formula in the Close Income Statement entries, because this will cause the entries to be posted in the normal accounting periods. A date with the format Cmm/dd/yy will be placed between the fiscal year you are closing and the next fiscal year. This makes it possible to still view income balances for any fiscal year using normal posting dates, 1/1/xx ..12/31/xx, in the date filters.
You should NOT enter dates with a closing date format for closing entries other than the entries used to transfer the income balances to the balance sheet. If you do, these entries will not appear in the normal reports when you enter the date range 1/1/xx .. 12/31/xx. You could also include the closing date C12/31/xx in the Date Filter for the report, but this would show all closing entries giving a net result of 0 for all income statement accounts.
The Close Income Statement batch job can be used several times. You can post in a previous fiscal year, even after the income statement accounts have been closed, if you run the batch job again afterward.
To run the Close Income Statement batch job:
- On the Financial Management menu, click General Ledger, Periodic Activities, Fiscal Year, Close Income Statement.
You can define how the batch job will be executed by filling in the fields. Complete them in as follows:
- Fiscal Year Ending Date - The program will suggest the last day of the latest closed fiscal year. The closing entries will be posted with a fictitious (Cmm/dd/xx) day to allow it to have the proper balance on both of the days on either side of the closing. Don’t change this date in the journal batch.
- Gen. Journal Template - Select the name of the general journal template that the entries will be placed in. Click the AssistButton to the right of the field to see the existing general journal templates.
- Gen. Journal Batch - Select the name of the general journal batch that the entries will be placed in. Click the AssistButton to the right of the field to see the existing general journal batches.
- Document No. - If you filled in the Gen. Journal Template field and the Gen. Journal Batch field, the batch job automatically fills in this field with the next available number from the number series for the journal batch. You can also fill in this field manually.
- Retained Earnings Account – Enter the G/L Account number for the Retained Earnings account.
- Posting Description - Enter a text that will accompany the entries. The default text is Close Income Statement.
- Close by - Here you can choose how many entries will be created by the batch job:
- Business Unit Code – If the company is a consolidated company, separate entries will be created per business unit if you place a check mark in this field.
- Dimensions - If you select any dimensions in this field, the program posts one entry for each dimension value combination used in a G/L account. If you do not choose any of these, only one entry will be created for each account.
NOTE: If using Dimensions, you must select the three dots, then select all of the dimensions by placing a checkmark next to all of the dimensions, and then select OK.
It is important to select the dimensions on the Options tab in order to report by dimensions.
This is an example of how the Options tab may appear:
- Click OK to start the batch job.
- Open the General Journal window to see the resulting journal entries created by the batch job.
4. Click Posting, Post (F11) to post the journal entries.
