Closing the financial year in Business Central is a crucial process that ensures your company’s financial records are accurate and up to date. This guide will walk you through each step of the year-end close process, from preparing your accounts and reconciling balances to generating final reports and rolling over balances to the new fiscal year. By following these steps, you can streamline your year-end activities, minimize errors, and ensure a smooth transition into the next financial year.

Recommendations for Year-End Close

Preparation is key to a smooth year-end close process in Business Central. Here are some key recommendations:

• Review Financial Statements: Ensure all transactions for the fiscal year are recorded.
• Reconcile Accounts: Reconcile bank accounts, customer and vendor balances, and other key accounts.
• Adjust Entries: Make any necessary adjusting entries for accruals, deferrals, and corrections.
• Restrict Posting to prior year: Once the reconciliations are completed, we recommend the restriction of posting to the prior year for most users through the General Ledger Setup or User Setup page.
• Review the “Income/Balance” field of all your accounts to ensure they are set up correctly: This step is important because the close income statement process will determine which accounts will roll up to retained earnings (Income Statement accounts) and which accounts’ balances will carry over to the new year (Balance Sheet accounts).
  

Accounting Periods

To run the year-end close process, you must first close the year within the accounting periods window. Closing the year will not prevent you from posting transactions into that year, but it is necessary to enable the close income statement process. Please find the steps below.

Closing Accounting Period

1. Select the icon, enter Accounting Periods and choose the option highlighted below.
   
2. In the Accounting Periods window select Home > Close Year
   
3. Click Yes to continue the closing of the year.
   (NOTE: As noted previously, although the year has been closed this does not restrict users from posting to a prior year. Users will still be able to post to a past year if they are allowed to within the General Ledger Setup or User setup Posting to and from fields.)
4. The accounting periods for the selected year will now show as “CLOSED”
   

Creating a new Accounting Period Year

As preparation for the new year, you can create the new fiscal year within the accounting periods page. If it has already been setup, please skip this section.

1. In the Accounting Periods window select Process > Create Year
   
2. In the Create Fiscal Year page
   • Starting Date – First Day of new Fiscal Year
   • No of Periods – 12
   • Period Length – 1M (Specifies one month)
     
3. Click Ok to create the year

Close Income Statement

In Business Central, the Close Income Statement batch process is used to transfer the year’s balances to a retained earnings account on the balance sheet and to close all income statement accounts. This process generates a journal that needs to be posted manually in the desired batch.

In Business Central, you can run the Close Income Statement process multiple times. Even after closing the fiscal year, you can still post to the previous year by re-running the close income statement process. The journal entries created during this process will have a “C” prefix before the date, to distinguish them as closing entries.

1. Choose the icon, enter Close Income Statement and choose the option in red below. 
2. In the Close Income Statement window, populate the fields as follows
   • Fiscal Year Ending Date: Enter the ending date of the fiscal year you are closing
   • Gen Journal Template: Select “GENERAL”
   • Gen Journal batch: Choose an existing batch or create a new one where you would like the close income statement to be created.
   • Document No.: Will populate automatically with the next document number or you can enter a desired document number.
   • Retained Earnings Acc.: Select your retained earnings account
   • Post to Retained Earnings Acc: Determines the level of detail for the closing entry:
     1. Balance: Retained Earnings are posted as an extra line with a summarized amount.
     2. Details: Entries are posted with the Retained Earnings account as a balancing account on each line.
   • Posting Description: Default message is “Close Income Statement” but can be changed as needed.
3. In the Close By section:

• Business unit code – Mark this option if you are running the close in a consolidation company and want to close by the business unit (company).
• Dimensions – If dimensions are used, click on the “….” to select the dimension codes that you would like to close by. This will create close entries for each Income Statement GL account by dimension.

 

4. Click Ok. Business Central will then begin creating the closing journal entries in the batch specified in the Close Income Statement window. Once the process is complete, a confirmation message will be displayed.
   

   Post Closing General Journal Entry

   1. Under the Finance menu select General Journals or choose the icon and enter General Journals.
      
   2. Select the batch that you entered in the Edit – Close Income Statement window.
      
   3. You can then review the general ledger entries created, and you will see that the posting date will have a “C” in front of the date to distinguish them as closing entries.

   

    

   4. When ready to post click on Home > Post.

   

   This completes the close income statement process in Business Central. Remember, if you need to make any adjustments, including auditor adjustments, you can always post back to the prior fiscal year by updating the allowed posting dates in the General Ledger Setup or User setup page. However, you will need to rerun the close income statement process to update the retained earnings account accordingly. This ensures that your financial records remain accurate and up to date.