The nominal ledger keeps all periods of the year open, so there are no particular actions which need to be taken at the end of each period. For your convenience you can set the default period number to the current period so that you do not need to keep changing the period number when posting journals.
The year-end procedures themselves take place in two distinct phases. Firstly, you need to start a new year in the nominal at some convenient point. Secondly — but not usually until well into your new year — you need to close down the old year and do some housekeeping on the nominal such as to clear down historic transactions.
You may need to start a new year in your nominal ledger as soon as, or even before, the new year has actually started. This is because the sales and purchase ledgers can only post forward transactions if there is a forward period defined in the calendar. When they reach the final period of the year, there is no forward period. The solution is to start a new year, which makes the current year become the old year.The sales and purchase ledgers are then positioned in the last period of the old year, and now have a forward period (the first period of the new year) into which to post forward transactions.
You cannot only have two financial years open at one time so you cannot start a new year until the old year is closed — but there is unlikely to be any reason for the old year still to be open a year after it has ended. After you’ve started a new year, the current year becomes the old year but it is still open for further journals or updates from other systems. This can then remain open as long as you like (until the end of the next year if required). In most circumstances you will close this year when you send your annual accounts for audit. At that time you may want to clear down old transactions too.
As with any procedure altering files on a global basis, it is recommended that you take security copies of your files before you undertake any year-end procedures.
Article ID: 1037
Created On: Wed, Jun 27, 2012 at 2:35 PM
Last Updated On: Mon, Jun 19, 2023 at 7:16 PM
Online URL: https://kb.datafile.co.uk/article/year-end-procedures-nominal-1037.html