Closing a Fiscal Period

Closing a fiscal period ensures that the information on your income statement and balance sheet for a month is consistent and won’t change because of future transactions. Closing the month also helps to ensure that you can associate activity in the subledger accounts with the asset and liability accounts in the general ledger.

Note: Several reports can provide you with information for comparing subledger accounts to the general ledger accounts. For more information, see Reports for Closing.

To close a fiscal period

1. Apply any outstanding payments and credits in the customer and vendor open-item ledgers. For more information, see Applying ROAs or Applying Payments and Vendor Credits.

2. Verify that transactions posted to the appropriate accounts:

a. Review the balance sheet and income statement.

b. If an account balance seems too large or too small, research the transactions that posted to that account. If you find any transactions that posted incorrectly, make correcting entries.

3. Verify that customer and vendor subledger balances equal accounts-receivable and accounts-payable balances in the general-ledger:

a. Compare the totals on the Customer Balance Report to the accounts-receivable totals on the balance sheet. Research and correct any discrepancies.

b. Compare the totals on the Vendor Balance Report to the accounts-payable totals on the balance sheet. Research and correct any discrepancies.

4. Make sure the balances of the inventory subledger accounts equal the balances of the inventory accounts in the general ledger. For more information, see Recalculating Inventory Value.

Note: To further ensure the accuracy your inventory balances, take a physical inventory count. You can take inventory for each month-end close or only when you close Period 12.

5. Delete expired quotes (optional). For more information, see Deleting Expired Quotes.

6. Reset the quantities of noninventoriable items to zero (optional). For more information, see Resetting Quantities of Noninventoriable Items.

7. Before the first transaction of the new fiscal period, establish a financial baseline for the month that’s being closed by generating the following documents:

Balance sheet
Income statement
Reports detailing activity in the customer, vendor, and inventory subledger accounts.

Note: The information on some reports changes with new activity. Therefore, you need to print them before the first transaction of the new month. For more information about reports you might want to print at closing time, see Reports for Closing.

8. Record adjusting journal entries for items such as depreciation, payroll, and interest. Backdate the entries so they post to the month that’s being closed.

Note: You might need to generate additional balance sheets to monitor changes in account balances as you make adjusting entries.

9. When you have finished posting journal entries to the month that’s being closed, lock the month. For more information, see Locking a Fiscal Period.

Note: A fiscal period can be locked and relocked until you close the year in which that period is included.

10. Back up your data to removable media. For more information, see Month-End Backups.