General Ledger provides two options for the Income Statement Closing Journals. You can choose to zero out each income statement account, and post the balance to the retained earnings account. Alternatively, you can post the reciprocal of the net income balance to an income statement offset account instead of zeroing out each revenue and expense account.
The Income Statement Closing Journals program generates journals to close out the year - to - date (YTD) actual balances of a range of revenue and expense accounts. This program can be submitted for any open period for a single ledger, or ledgers in a ledger set, so long as you have read and write access the entire ledger through your data access set.
The Income Statement Closing Journals program can accept two account templates as parameters for the closing journal.
The Retained Earnings account template
The Income Statement Offset account template
The Retained Earnings account template is a required parameter. The Income Offset account template is an optional parameter.
When you run the process, Create Income Statement Closing Journals, and you enter an account for the field, Closing Account in the Parameters window, entries are posted against each revenue and expense account in the account range processed. It is the reciprocal of the account's YTD balance and zeroes out each account. The amount posted to the retained earnings account is effectively the net sum of the revenue and expense accounts' YTD balances.
If there are income statement balances in both the ledger currency and entered currencies of a ledger, the closing process produces a journal batch that contains separate journals for each currency processed. For the ledger currency, the journal will only have entered amounts as converted amounts do not apply. For entered currencies, the journal will have both entered and converted amounts.
Stat account balances are not processed by the program.
When you run the process, Create Income Statement Closing Journals, and you enter an account for the fields, Closing Account and Income Offset Account in the Parameters window, the journal generated will be similar to that described above except for the following:
The revenue and expense accounts included in the specified account range will not be zeroed out. Instead, the program will take the net sum of the revenue and expense accounts. This sum includes the balance in the income statement offset account. It will then post the reciprocal of the net sum to the income offset account, in the appropriate debit (DR) or credit (CR) column.
The amount posted to the retained earnings account will be the reciprocal of the amount posted to the income offset account. This retained earnings amount will then also be equal to the net sum of the revenue and expense accounts processed.
The examples that follow show the two types of journals that are generated by the Income Statement Closing Journals program. Scenario A shows the resulting Income Statement Closing Journals if only the retained earnings template is specified. Scenario B shows the resulting Income Statement Closing Journals if both the retained earnings and optional income statement offset templates are supplied.
For these examples, assume the following transactions, shown in the tables below, are posted for the period to a ledger whose ledger currency is GBP.
Transaction 1
Currency: GBP
| Account | Entered DR | Entered CR |
|---|---|---|
| Cash | 6,000 | |
| Revenue | 6,000 | |
| COGS | 2,000 | |
| Inventory | 2,000 |
Transaction 2
Currency: CAD, Rate Type: Spot, Exchange Rate: .125
| Account | Entered DR | Entered CR | Converted DR | Converted CR |
|---|---|---|---|---|
| Cash | 10,000 | 1,250 | ||
| Revenue | 10,000 | 1,250 | ||
| COGS | 3,000 | 375 | ||
| Inventory | 3,000 | 375 |
Transaction 3
Currency: CAD, Rate Type: Spot, Exchange Rate: .1
| Account | Entered DR | Entered CR | Converted DR | Converted CR |
|---|---|---|---|---|
| Cash | 4,000 | 400 | ||
| Revenue | 4,000 | 400 | ||
| COGS | 1,000 | 100 | ||
| Inventory | 1,000 | 100 |
Balance Summary
| Account | Entered GBP | Entered CAD | Total GBP |
|---|---|---|---|
| Cash | 6,000 DR | 14,000 DR | 7,650 DR |
| Revenue | 6,000 CR | 14,000 CR | 7,650 CR |
| COGS | 2,000 DR | 4,000 DR | 2,475 DR |
| Inventory | 2,000 CR | 4,000 DR | 2,475 CR |
Scenario A - Income Statement Mode
If only the retained earnings account is specified, the following income statement closing journal batch will be generated. The Income Statement Close Journal Batch will have two journals, shown in the tables below:
Scenario A, Journal 1
Source: Closing Journals, Category: Income Statement Close, Currency: GBP
| Account | Entered DR | Entered CR |
|---|---|---|
| Revenue | 6,000 | |
| COGS | 2,000 | |
| Retained Earnings | 4,000 |
Scenario A, Journal 2
Source: Closing Journals, Category: Income Statement Close, Currency: CAD, Rate Type: User, Exchange Rate: 1
| Account | Entered DR | Entered CR | Converted DR | Converted CR |
|---|---|---|---|---|
| Revenue | 14,000 | 1,650 | ||
| COGS | 4,000 | 475 | ||
| Retained Earnings | 10,000 | 1,175 |
Scenario B - Income Offset
If the income offset and retained earnings accounts are both specified, the following income statement closing journal batch will be generated.
The Income Statement Close Journal Batch will have two journals, shown in the tables below:
Scenario B, Journal 1
Source: Closing Journals, Category: Income Offset, Currency: GBP
| Account | Entered DR | Entered CR |
|---|---|---|
| Income Offset | 4,000 | |
| Retained Earnings | 4,000 |
Scenario B, Journal 2
Source: Closing Journals, Category: Income Offset, Currency: CAD, Rate Type: User, Exchange Rate: 1
| Account | Entered DR | Entered CR | Converted DR | Converted CR |
|---|---|---|---|---|
| Income Offset | 10,000 | 1,175 | ||
| Retained Earnings | 10,000 | 1,175 |
Before running the process, Create Income Statement Closing Journals, review the following activities for the ledgers you plan to close. If you use reporting currencies (journal and subledger level), review the following activities for the reporting currencies you plan to close.
Post all revenue and expense adjustment entries to the appropriate periods.
Print General Ledger accounting and analysis reports.
Ensure the period you are closing is an Open period.
If you have accounts you want to process that have any of the following attributes:
Enabled flag was disabled
Allow Posting flag was disabled
Effective date is out of range
Temporarily re-enable the account to post the generated closing journal. The Segment Value Inheritance program can help you temporarily re-enable these accounts. Use the Segment Value Inheritance program to disable these accounts once the closing journal has been posted.
Run the close process, Create Income Statement Journals in the adjusting period that represents the last day of your fiscal year or the period you want to close for your ledger or ledger set.
Note: If you want to run the close process for your primary ledger and the associated secondary ledgers simultaneously, create a ledger set that contains all of the ledgers. Then run the close program for the ledger set so that all of the ledgers are processed from a single submission
In the Parameters window, enter an account in the Closing Account field. The Category field below defaults to display Income Close.
If you are closing a period and you entered an account for the Closing Account and Income Offset Account fields in the Parameters window, submit your request to generate closing journals. The category field below defaults to display Income Offset.
Post the income statement closing journals to update year-to-date actual balances or period to date actual balances. If you chose the Income Statement Offset option, proceed to your next open period.
Note: Should you need to make adjustments for your ledger after their income statement closing journals are posted, reverse and post the original closing entries, make your adjustments, then rerun the closing process to capture the new adjustments for that ledger .
Run the Open Period program to open the first period of the new fiscal year. This program closes out all revenue and expense accounts to the Retained Earnings account. However, because posting of the closing journals has already zeroed out the revenue and expense accounts to the Retained Earnings account, there are no balances to transfer and no further effect on Retained Earnings.
If revenue and expense adjustments need to be made after opening the new fiscal year for your ledger, posting those back - dated adjustments will automatically update the beginning balances of the Retained Earnings account for all open periods in the new year. However, amounts in the closing journal will not reflect the adjustments. For accuracy, you must reverse the closing journals, post, enter your adjustments, run the Create Income Statement Closing Journals, and post for your ledger.
General Ledger automatically creates a separate journal batch for each ledger in a ledger set if the closing program is submitted for that ledger set.
The effective date of your closing journal entries is the last day of the period you specify in the parameters window, typically the adjusting period on the last day of your fiscal year.
The closing journals you generate are marked for reversal in the same period the journals were generated. The reversal method defaults to Change Sign. To change the default reversal method, see Changing The Default Reversal Method, below.
General Ledger closes the ledger currency and entered currency balances with different journal entries within a ledger's journal batch:
Ledger Currency: Journal entries reflect only entered amounts. Journal entries do not address entered converted or accounted amounts. General Ledger closes functional and foreign currency balances with different journal entries:
Foreign Currency: Journal entries reflect both entered amounts as well as the converted amounts. You journal will display a conversion Type of User and a Rate of 1.
If you experience accounting changes you want to capture after you have run the Create Income Statement Closing Journals program for a particular ledger, consider the following options:
Option 1, Retained Earnings Account Template: If you are only using the Retained Earnings Account Template, reverse all the journals created by the last run of the Create Income Statement Closing Journals program, then run the program again to capture your changes.
Option 2, Income Statement Offset Account template: If you are using the Retained Earnings Account Template and the Income Statement Offset Account Template, run the Create Income Statement Closing Journals program to capture the accounting changes made since the last run of the program. Note the following conditions:
The account range you specify can be a different range but it must include the original account range you submitted before accounting changes were realized.
The account range you specify must include the income offset account.
Choose the reversal method you want to use for your journal category before you run the Create Income Statement Closing Journals process.
If you are using a journal reversal criteria set, choose the reversal method in the Journal Criteria Set window. If you are using the default reversal method for your category, you can change the reversal method by creating a journal reversal criteria set with the reversal method you want and assign it to your ledger.
OR
After you run the Create Income Statement Closing Journals process, navigate to the Journal Entry window, query your generated journals and change the reversal method.
Additional Information:
Journal and Subledger Transaction Level Reporting Currencies: You need to run the Create Income Statement Closing Journals program separately for the ledger and for each of the reporting currencies (journal or subledger level). However, you can run the program simultaneously for a ledger and its associated reporting currencies (journal or subledger level) by grouping them together in a ledger set and running the program for the ledger set. This results in a journal batch for each ledger and for each reporting currency (journal or subledger level) and entered currency. You need to post your generated closing journals separately as well.
Average Balance Ledgers: The Create Income Statement Closing Journals program creates journal entries for standard account balances for ledgers with average balancing enabled. Companies using average balance processing should create an accounting calendar with two adjusting periods at the end of the fiscal year you want to close. The first adjusting period, representing the last day of the fiscal year, is used to generate the Closing Journals program. The second adjusting period, also representing the last day of the fiscal year, is used to reverse the closing journal. This ensures that average balance calculation is unaffected.
Non-Consolidating Ledger: The effective date of the closing journal entries is the last day of the specified period unless you assign effective date rules for the journal source called Closing Journals in the Journal sources window. See: Journal Sources. When the closing journals are posted, the standard and average balances are both updated.
If the closing account is specified as an income statement account, the revenue and expense account balances are transferred to this closing account. There is no effect on average balances.
If the closing account is specified as a balance sheet account, and the defined period is the last period of the fiscal year, the average balance of the closing account is updated. The average balance of the Net Income account and the net average of all income statement accounts is also updated.
Consolidating Ledger: The Create Income Statement Closing Journals will only create closing journals for standard account balances, not average account balances.
Navigate to the Submit Request window.
Choose to Submit a single request.
The Submit Request Window appears.
In the Request Name field, select Close Process: Create Income Statement Closing Journals program.
Complete the following parameters:
Ledger/Ledger Set: Enter a ledger or ledger set. If your data access set has a default ledger and you have full access to the default ledger, this ledger is defaulted. You can only select from ledgers or ledger sets where you have read and write access to the entire ledger through the responsibility's data access set.
If you use reporting currencies (journal or subledger level), you can enter a reporting currency in the Ledger/Ledger Set field.
Period: General Ledger defaults with the latest open period when a ledger is specified. You can only select from periods that are open for your ledger or ledger set. Typically, you specify an adjustment period that represents the last day of your fiscal year.
Account From: Enter the starting account range.
Account To Range: Enter the ending account range.
The range can span multiple balancing segments and include your entire chart of accounts listing. General Ledger only extracts balances of revenue and expense accounts within the range you specify.
Closing Account: Specify a closing account, typically the retained earnings account on the balance sheet. If you are closing multiple balancing segments, General Ledger creates separate closing accounts for each balancing segment.
Note: If the balance sheet closing account is within the range you specified, General Ledger ignores this account when extracting balances.
Income Offset Account (optional): Enter an income statement account for your offset account.
Category: Two default categories can be displayed:
Income Statement Close: If you entered a closing account for the field, Closing Account only.
Income Offset: If you entered a closing account for the field Closing Account and an offset account for the field Income Offset Account.
You can change the default category setting displayed.
Choose OK to close the Parameters window.
Submit the program.
The process generates journal entries that you can view in the Enter Journals and Post Journals windows. The journal source, Closing Journals, and the journal category, Income Statement Offset, are assigned to this closing journal. You can specify different names in the Journal Sources and Journal Categories windows.
When the program is submitted for a single ledger, a single request is submitted and a single journal batch is created.
When the program is submitted for a ledger set, a parent request is submitted and a child request is submitted for every ledger in the ledger set. A journal batch is created for every ledger and entered currency. You may review the Ledger Set Submission Report of the parent request to see what ledgers or reporting currencies (journal or subledger level) were submitted or not submitted.
If you use reporting currencies (journal or subledger level), and you submit the program for a reporting currency or a ledger set that includes reporting currencies, a separate request is submitted for every reporting currency and a journal batch is created for every reporting currency.
Post your generated closing journals to update balances before closing the period.
If you do not need to close your balance sheet, you can close the current period and open the new fiscal year.
Navigate to the Open and Close Period window.
General Ledger displays the Latest Open accounting period.
Change the Latest Open accounting period if necessary.
Choose the Open Next Period button to open the new year. Or you can alternatively run the Open Period program from the Submit Request window to open periods.
The Open Period program automatically transfers the Y-T-D income statement balances to Retained Earnings.