The fiscal year is the 12 month operating cycle your company uses to complete IRS Form 1120 - Corporate Tax Return. Typically, the company’s fiscal year will coincide with the calendar year but that is not always the case. In some instances, the company’s fiscal year coincides with the opening of the business. For example, if the business opens in the March, then the fiscal year might run from March through February of the next year.
The purpose of this program is to clear the general ledger income and expense accounts for the current fiscal year and to transfer their balances into the prior year unaudited profit. At the same time, the system will transfer all current fiscal year balances to the prior year and all future fiscal year balances will be transferred to the current fiscal year. This will be reflected by the year changing on the Current Fiscal Year tab, the Prior Fiscal Year tab and the Future Fiscal Year tab of the SYSTEM DATE file, option 1815.
The program should not be run until you have received your final year-end adjusting entries for the fiscal year being closed from your accountant. As long as the current fiscal year appears on Current Fiscal Year tab of the SYSTEM DATE file, there is no need to prematurely run this program. You have up to 12 months before you must clear the current fiscal year.
NOTES:
This program will not run unless the Year/Month shown on the System Date tab in the SYSTEM DATE file is greater than the fiscal year being closed. The system must also be placed in Supervisor status.
If you are running this program in the middle of your fiscal year, you do not need to run the month-end clear program prior to running this program.
WARNINGS!
Once the fiscal year clear has been run, you can no longer enter or update anything to that fiscal year.
Make sure you run all financial reports (i.e. financial statements, general ledger, etc.) pertaining to the fiscal year being closed prior to running this program. Once the program is run, you will not be able to retrieve this report information for the fiscal year that is closed.
Pre-closing check list:
1. If this is the first time you have closed the fiscal year on UDS, you need to identify the general ledger account number you wish to use as the income/expense close out account (termed “prior year unaudited profit” in UDS) for the fiscal year being closed. This account stores the summation of your income and expense accounts (the net income/loss) for the fiscal year being closed. The account is used by your accountant to make year-end adjusting entries that may involve income and expense accounts for the fiscal year being closed. The account number should be located in the equity section of your general ledger chart of accounts. To identify the account, follow these steps:
A. Enter option 0152.
B. Enter GL as the File ID.
C. Under the Lin column, scroll down then double click on 069.
D. Click in the field. Enter the general ledger account number you wish to use as the prior year unaudited profit, then press the <Enter> key. For example, if the account number you wish to use is 3980, then you enter 3980.0000.
E. Click on the Store Line button.
F. Click on the OK button.
G. Click on the Exit button to return to the menu.
2. If this is not the first time you have closed the fiscal year on UDS, verify that the prior year unaudited profit account has a current balance of zero. This can be done be following these steps.
A. Go to option 1611
B. Enter the account number for prior year unaudited profit. If the account number is not known, click on the spyglass to locate the number. This should be the same account number verified in step 1.
C. Enter the last fiscal period of the fiscal year being cleared as the Accounting Period.
D. Check the Curr Balance field to verify that it is zero. If the account is not zero, you will need to make a journal entry to move the balance from the account "Prior Year Unaudited Profit" to the account "Retained Earnings". If the balance shows as a positive number you will credit the amount out of the “Prior Year Unaudited Profit” account and debit the amount to “Retained Earnings”. If the balance shows as a negative number, you will need to debit the amount out of the “Prior Year Unaudited Profit: account and credit the amount to “Retained Earnings”.
3. You cannot have any checks in the Requested Check file, option 1217, or the Requested Escrow Checks file, option 2217. Make sure that you print all requested checks and accept them as correct. If you do not wish to run the checks at this time, call the UDS Support Staff to remove the checks from the file.
4. Update the system using option 1311 to make sure that there are no transactions in the unposted file.
5. Always make a backup copy before you close out the year and keep it until next year.
Program Procedure:
1. Enter option 1385.
2. The system will display the screen shown in Display Example 1.
Display Example 1
Have you done a monthly BACKUP?
Click on the Yes button if you have made a monthly backup copy; otherwise, click on the Exit button to return to the menu.
Clear Totals
Click on the Clear Totals button to continue the procedure. The system will prompt “You Are Closing Fiscal Year Ending mm/dd/yyyy Continue?” Verify that the last date of the fiscal year you are clearing is the date being displayed. If the date shown is correct, click the Yes button to continue the clear process; otherwise, click on the No button to cancel to clear process and contact a UDS customer service representative for further assistance.
The system will display the prompt shown in Display Example 2.
Display Example 2
Verify that this is the fiscal year you are closing by clicking on the Yes button. If you do not wish to close this fiscal year, click on the No button.
Once the files have been processed, the system will prompt "Fiscal Year End Clear Finished". Click on the OK button to return to the menu.
Transfer any prospective budget figures to the current year. See Transferring Prospective Budget to Current for more information.