I wanted to start this off as a new post in its own rights as there are a number of mentions in some separate posts and I think it needs addressing.
It is clear that there are 3 different opinions regarding the actual date that 'Accountants year end / opening / closing adjustments' are posted.
1) Enter it is last day of financial year
2) Enter it on first day of financial year
3) Not bothered.... Does it really matter.?
I am saying this as an accountant who has seen many 1'000's of clients records and it is a particular bug bear of mine.
Please post all year end journals as the last day of the financial year to which they relate
It may seem petty and unimportant but for the following reasons it is important:
The opening balances will agree to the final accounts as submitted.
The management opening balances will agree to the final statutory accounts for the previous year- a regular check for accuracy by banks & accountants.
If there are significant (ie material) adjustments then posting them as option 2 will effect the management accounts for month 1 of the new financial year and potentially distort the management accounts.
One check needs to be made to ensure no late transactions posted (P&L Reserves)
A re-allocation journal will need to be made in the compliance software as the opening balances wont agree (as accountants post the TB to IRIS, SAPA, VT etc)
There are obviously ways to check the opening balances if option 2 is done but it is time consuming and unnecessary if Option 1 is done.
The first check any accountant will do on preparing year end accounts is check the opening P&L reserves match the prior year closing reserves.
If you do Option 1 then they will agree - unless there were late transactions then you can investigate and adjust accordingly.
If you do Option 2 then they just wont agree. A journal will need to be posted in the compliance software (IRIS SAPA VT etc) to move the year end adjustment to the opening balances for all the entries (so duplicating the effort). Then if they still don't agree can investigate and adjust accordingly for late transactions
If you are in Option 3 category them please just follow Option 1.....
Please don't anyone take this personally, it is my opinion but I wanted to explain fully the reasons why I believe it is important to post all year end adjustments as just that (at the Year end)
Let the debate begin
Cheers
Jeremy
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p.s. not difficult to spot, I'm an option (1) boy.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
In my experience, a lot of organisations will use a 13th calendar period (if their software accommodates it) to record the year end roll-up journal. Keeps things explicit and well documented.
-- Edited by bro0010 on Tuesday 23rd of July 2013 09:25:32 AM
We've both agreed on this one before, Jeremy: It's option one for me, and I've yet to see a convincing argument from people who go for option two as to why they think it's preferable.
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Vince M Hudd - Soft Rock Software
(I only came here looking for fellow apiarists...)
I actually discussed this face to face recently during a sale meeting for my software - the realisation that they had been doing it "wrong forever" and that they saw the reasons why was nice....
Cheers
Jeremy
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It would be great if clients dated the year end adjustments as the last date of their financial year. If that is what they wish to do, and they use sage, then they should not close off their year end, they should keep it open until they get the journals from their accountant.
If they have closed off the year then they will have to post journals as the first date of their new financial year. Sage does not like dates of the previous year if that year has been closed off.
I've just done a set of accounts done on sage where the book-keeper has made a right mess of it by posting previous years dates and yet speaking to her she's a very confident person who can do no wrong :)
No, there is no need to keep the previous year open - Sage's warnings (which can be suppressed) are really there to dissuade the posting of day to day transactions in the previous year (and, conversely, it will give a similar warning when posting current year transactions and the previous year is still open). Sage actually copes fine with the year end adjustments. (If it's doing something odd as a result of them, the person who posts them must be doing something wrong).
And with some accountants I know, keeping the year open until they've done their bit would prevent the client from being able to extract monthly figures for a touch longer than they'd like.
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Vince M Hudd - Soft Rock Software
(I only came here looking for fellow apiarists...)
I'm an Option 1 supporter, though interestingly I have sometimes been requested by the accountant to post first day of the new year - option 2. Can't think why.
As for Sage and the management accounts problem, you can generate a P&L/Balance Sheet/TB using the Transnational reporting options in the Financial reports module. The Year To date figures will be shown for the period from the beginning of the year not yet closed, so maybe 13, 14 of 15 months or more, but the Period column will give you one month's figures.
This reporting option is also handy for a number of other purposes where you want to apply random date ranges.
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Sheelagh Lyons Bookkeeping Clarity Making Bookkeeping Clearer
The answers I provide are meant as a general guide only and do not constitute advice.
"As for Sage and the management accounts problem, you can generate a P&L/Balance Sheet/TB using the Transnational reporting options in the Financial reports module. The Year To date figures will be shown for the period from the beginning of the year not yet closed, so maybe 13, 14 of 15 months or more, but the Period column will give you one month's figures."
Yes, I can do that.
Clients, on the other hand, often need lots of hand holding, and struggle to do anything if it isn't using the method they're used to.
Well, those of mine who like to do that sort of thing themselves do. (Even with the usual method of getting a P&L, some still need to be reminded to set sensible start and end dates, and not just run the report with the defaults - usually after they've sent me a PDF and asked why these figures make no sense!)
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Vince M Hudd - Soft Rock Software
(I only came here looking for fellow apiarists...)
"Sage actually copes fine with the year end adjustments. (If it's doing something odd as a result of them, the person who posts them must be doing something wrong). "
Any ideas on how 'previous years' adjustment is cleared from the captital account , this shows up if the previous years year end adjustments are included as the year end date but after the sage year end close off.
I would not show a set of accounts to anyone where this is showing as I would suggest it is not good practise.
Would be great if there is a way to sort it............................
Also accountants post the trial balance from sage to there accounts software. The profit+loss nominals on the TB will include the previous years adjustments that were entered after the year end close off. The result being that the initial p+l the accountant sees does not match the sage p+l. The difference is the 'previous years' adjustment in the sage capital account.
I would still suggest that it's better to keep the year open and include accountants year end adjustments before sage year end close off.
-- Edited by Anniesplace on Thursday 15th of August 2013 10:32:55 AM
"Any ideas on how 'previous years' adjustment is cleared from the captital account , this shows up if the previous years year end adjustments are included as the year end date but after the sage year end close off."
I'm not sure I understand the question in the context of what I said.
If your year end is 31st December, and you post a year end adjustment to the capital account on that date, it is a transaction in that account on that date.
If, on the other hand, you post a year end adjustment to the capital account on 1st January, it is still a transaction on the account, just a day later.
It'll "show up" on the account in either case - although if you post it as the year end date (31/12), and your report only shows the current year's transactions, it won't be shown individually, because it'll be included in the opening balance.
"Also accountants post the trial balance from sage to there accounts software. The profit+loss nominals on the TB will include the previous years adjustments that were entered after the year end close off. The result being that the initial p+l the accountant sees does not match the sage p+l. The difference is the 'previous years' adjustment in the sage capital account."
There should be no year end adjustments to P&L codes. If, as part of the process of accounts production, the P&L figures have changed, the net of these changes should be included in the year end adjustment posted to the retained profit (or equivalent, depending on the nature of the business).
Unless I've misunderstood your question.
Edit: A "would" changed to a "won't" - some mistakes don't matter. One that means the complete opposite does, a bit!
-- Edited by VinceH on Thursday 22nd of August 2013 02:48:45 PM
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Vince M Hudd - Soft Rock Software
(I only came here looking for fellow apiarists...)
"Any ideas on how 'previous years' adjustment is cleared from the captital account , this shows up if the previous years year end adjustments are included as the year end date but after the sage year end close off."
If postings are made to the P&L codes after the year end has been closed down but dated as before then on the balance sheet in the capital and reserves section they will show up as 'Previous Years Adjustment' below the P&L reserves account.
You cant amend this in the COA. Sage adds up all the P&L totals it has not 'cleared down' at the year end and puts the balance here
It is standard practice to post all P&L adjustments to the P&L reserves code as 3200 to ensure that this one balance agrees to the final accounts. Then if someone has still posted additional transactions in the previous year they are highlighted in the same way as above.
Posting all P&L adjustments to the P&L reserves is ok, however do note that your comparatives for the P&L wont show these corrections. But........ there is a way to amend this in Sage and I am happy to show anyone how..
So you should be closing down the year end and posting the closing balance journals as the last date of the year.
Hope that helps
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Gosh, that's lovely news that closing off early can be done and still get the P&l Balance sheet for previous year and current year printing correctly. With correct comparatives too :)
So pretend my year end 31 December 2012 and I've closed off the year. The accountant comes back to me and says they included an accrual, £10,000 for purchases . How do I get that into Sage so that all my printouts are ok.
Thanks sooo much
-- Edited by Anniesplace on Friday 23rd of August 2013 06:59:08 AM
Gosh, that's lovely news that closing off early can be done and still get the P&l Balance sheet for previous year and current year printing correctly. With correct comparatives too :)
So pretend my year end 31 December 2012 and I've closed off the year. The accountant comes back to me and says they included an accrual, £10,000 for purchases . How do I get that into Sage so that all my printouts are ok.
Thanks sooo much
-- Edited by Anniesplace on Friday 23rd of August 2013 06:59:08 AM
You would post it as DR P&L Reserves (3200) £10,0000 CR Accruals £3200 dated 31st December 2012.
This would ensure the closing balance sheet matches the final accounts.
To adjust the P&L you would need to do a 'manual adjustment' to the nominal ledger buckets for the prior year. (Proceed here with caution and do it slowly as you need to ensure that these manual adjustments do net off, ie DR = CR!)
Double click on the Accruals account and in the last period add in the £10,000 as a minus as it is a credit (If there are figures there already then just add the £10k to it.)
Do the same for the relevant purchases nominal code as a +£10,000 then when you run the monthly reports it will show.
Please note, that the transactional reports wont pick the comparative up as you have not made a physical transaction for this P&L entry in the previous year
We tested this when developing OptegraMRP and feel it is the best way to deal with year-end adjustments and amending the P&L comparitives
Haven't got my work laptop with me at the mo so cannot say exact name of report but............ I often use the printout showing the profit and loss account with the prior year comparatives on it. So would this printout come out ok please ?
Haven't got my work laptop with me at the mo so cannot say exact name of report but............ I often use the printout showing the profit and loss account with the prior year comparatives on it. So would this printout come out ok please ?
Hi, if you are running the prior year P&L report under the financials tab it is included.
Good luck testing & please be extra careful making these 'manual adjustments' to your Sage Data ie ensure always that DR's = CR's..!
Thanks
Jeremy
__________________
"Quite simply the best add on for Sage we have ever invested in.."
Want to see what all the fuss is about? Click here: OptegraMRP
Gosh, that's lovely news that closing off early can be done and still get the P&l Balance sheet for previous year and current year printing correctly. With correct comparatives too :)
So pretend my year end 31 December 2012 and I've closed off the year. The accountant comes back to me and says they included an accrual, £10,000 for purchases . How do I get that into Sage so that all my printouts are ok.
Thanks sooo much
-- Edited by Anniesplace on Friday 23rd of August 2013 06:59:08 AM
You would post it as DR P&L Reserves (3200) £10,0000 CR Accruals £3200 dated 31st December 2012.
...
Hi All,
Just a personal preference regarding Sage year end here.
I'd post a journal as Dr Purchases (5000) £10,000 Cr Accruals (2109) £10,000, dated 30th December 2012 (I'll explain later), and then post a journal named as "Ledger Year End", dated 31st December 2012, to mimic what Sage would have done with the first journal if it had been posted prior to the year end process being run. The manual Ledger Year End journal would be Dr P&L Reserves (3200) £10,0000 and Cr Purchases (5000) £10,000. The prior year balance adjustments described by Jeremy then keep the prior year balances in line with the transactional data for each month (excluding the Ledger Year End transactions processed as 31 December 2012). Keeping all "normal" transactions away from 31 December 2012 allows you to run transactional reports to 30 December 2012 that agree with the balance based reports - only the Ledger Year End transactions not processed to the prior financial year balances are excluded.
I'm curious as to how software packages other than Sage handle year end issues?
Thanks for all the advice and interesting to know what can be done.
But, must admit I will be chickening out and leaving the sage open until the accounts are finalised. There are too many if's and but's for me. Even if I learn how to do it what if someone who isn't in the know looks at my work...........
I'm happy to keep the year open and feel more confident doing that :)
