Solution Properties
Solution ID:
200427112521988
Last Modified Date:
Thu May 22 11:16:28 UTC 2025
Taxonomy Path:
Case category//I have a problem with...//a report
Author:
[email protected]
Why is there a previous year adjustment on my balance sheet?
Description

A previous year adjustment appears on the balance sheet when a profit and loss nominal code carries a balance into the brought forward period.  The balance can be right or it could appear due to an error when posting transactions. 

 CAUTION: If any Sage 50 CIS corrections affect a submitted CIS Return period, you must resubmit the return for that period.  

Cause

A previous year adjustment appears in the Capital & Reserves section of the balance sheet if you:

  • Enter a transaction dated before the current year to a profit and loss code after running year end 
  • Delete or amend the value of a transaction dated before the current year after running year end
Resolution

To correct the brought forward balance on the profit and loss nominal code, you must find the transaction that caused the previous year adjustment.

You can then:

  • Correct the transaction if you've used an incorrect date
  • Move the balance into the Profit and Loss Account nominal code, by default, 3200
  • Move the effect of the transaction into the current year's management reports if required
  • Leave it as a brought forward balance

If you're unsure where to move the balance to, check with your accountant.

Find the transaction that caused the previous year adjustment

  1. On the Balance sheet report, click the Previous Year Adj link.

This opens the Period Trial Balance for the Brought forward period. Print this report to use in the Journal the balance to the Profit and Loss Account section.

  1. Check which profit and loss nominal codes appear on the report.  TIP: By default, these codes are 4000 and above. 
  2. Click the value next to the code to see the Nominal Activity report.

Print an Audit trail report for edited or deleted transactions

Deleting or editing a prior year profit and loss transaction creates a brought forward balance. If you haven’t run Clear Audit Trail, run an Audit trail report for deleted transactions.

 NOTE: If you've amended the value of a transaction, this shows a deleted transaction for the original value. This causes the brought forward balance which is the difference between the old amount and the new amount. 

  1. Go to Transactions then select Audit trail report.
  2. Complete the Audit Trail Report window as follows:
    • From the Audit Trail Type area, select Deleted Transactions
    • From the Output area, select the relevant output type
  3. Click Run.
  4. In the Criteria Values window, enter the date 01/01/1980 up to the last day of your previous year. Leave all other fields as default.

Transaction Date Between (inclusive) 01/01/1980 and 31/12/2024.

  1. Click OK.
  2. Check the deleted transactions to see which ones have affected the brought forward balances. 

You can journal the balance of any amended transactions to the Profit and Loss Account to clear the brought forward balance.

Clear the brought forward balance

You can now:

  • Correct the transaction date on the relevant transaction if it's incorrect
  • Journal the balance to the Profit and Loss Account if the transaction is correct
▼ Correct a transaction date
  1. Go to Transactions, select the transaction to amend, then select Edit.
  2. In the Created on field, enter the new date for the transaction.
  3. Click Save then Yes.
  4. Repeat steps 1 to 3 for any other transactions that you want to amend.

You've now corrected the date on the transaction that made up the previous year adjustment. The Capital & Reserves section of your balance sheet is now correct.

▼ Journal the balance to the Profit and Loss Account
  1. Go to Nominal codes and select Journal entry.
  2. Enter a Reference and a Date.

The date is to be the last day of the previous financial year to move the balances from the brought forward period.

  1. When the 'Date entered is outside current financial year' warning appears, click OK. 
  2. Enter the relevant nominal codes and amounts from the brought forward Trial balance report. 
  • Enter the values from the Trial balance to clear profit and loss brought forward balances. For example, enter a debit balance from the report as a credit

For example, post a journal for £/€100 to move the balance from 7000 Gross Wages to the Profit and Loss Account:

N/C Name Dept Details T/C Debit Credit
7000 Gross Wages Dept Correction of brought forward balance T9  

100.00
3200 Retained Profit and Loss Account Dept Correction of brought forward balance T9 100.00  
  1. Click Save then Close.

You've now moved the brought forward balance from the affected nominal codes to the Profit and loss Account nominal code.

Move the effect of the transaction into the current year

You can enter journals to leave the transaction dated in the previous year and move the balance into the new year.

Post two journals to move the balance to the new financial year. Date the first in the previous year to move it to the Profit and Loss Account. Date the second in the new year to move it back to the original nominal code.

  1. Go to Nominal codes and select Journal entry.
  2. Enter a Reference and a Date.

The date is to be the last day of the previous financial year to move the balances from the brought forward period.

  1. When the Date entered is outside current financial year warning appears, click OK. 
  2. Enter the relevant nominal codes and amounts from the brought forward Trial balance. 

For example, post a journal for £/€100 to move the balance from 7000 Gross Wages to the Profit and Loss Account:

N/C Name Dept Details T/C Debit Credit
7000 Gross Wages Dept Correction of brought forward balance T9  

100.00
3200

Retained Profit and Loss Account

 Dept Correction of brought forward balance T9 100.00  
  1. Click Save then enter a reference and the relevant date in your new financial year.
  2. Enter the relevant information to move the balance from the profit and loss to the relevant nominal code.

NOTE: You need to date this journal in the relevant month of the current financial year.

For example, post a journal for £/€100 to move the debit balance from 7000 Gross Wages to the Profit and Loss Account. Use the correct date in the new financial year:

N/C Name Dept Details T/C Debit Credit
7000 Gross Wages Dept Correction of brought forward balance T9 100.00

 
3200

Retained Profit and Loss Account

 Dept Correction of brought forward balance T9   100.00
  1. Click Save then Close.

You've now moved the balance from the brought forward period to the current financial year.

 

Steps to duplicate
Related Solutions