Posting adjustments into the previous financial year

Summary

How to post adjustments in the previous financial year in Sage 50 Accounts, and how to deal with these on your balance sheet.

Description

After the year end, make any corrections to the previous financial year by posting adjustments.

Resolution

If required, remove the prior year adjustments from the Balance Sheet by moving them into the Retained Earnings nominal code using journals.

The default-Retained Earnings nominal code is 3200. To check this, select Settings then choose Control Accounts.

Step 1 - Post the adjustments

NOTE:

Record bad debt adjustments by writing off balances, not as a journal to the debtors or creditors control accounts.

Select Nominal codes then choose Journal entry.
Enter a Reference and Date.

We recommend you use the last day of the previous financial year.
Enter the adjustments using the non-vatable tax code (default T9) and enter the net amounts only, then press Save.

TIP:

To avoid having to post extra transactions, post any adjustments to profit and loss (P&L) nominal codes to the Retained Earnings code.

Step 2 - Identify the P&L nominal codes with brought forward balances

Select Nominal codes then choose Trial balance.
Select Preview then press Run.
In the Criteria window, from the Period dropdown list, choose Brought forward then press OK.
Check the report for any values shown against P&L nominal codes.

By default, these nominal codes range from 4000 to 9999.

For example, the following Trial Balance includes nominal code 4001 with a brought forward balance of 4500.00. This appears on the Balance Sheet report as a Previous Year Adj.

Step 3 - Post journals to clear the P&L brought forward balances

Post a journal dated the last day of the previous financial year to transfer the brought-forward P&L balances to Retained Earnings (3200).

Example

The following brought forward value appears on the Trial Balance:

N/C	Debit	Credit
4001 - Sales Type B		4500.00

Post the following journal dated the last day of the previous financial year:

N/C	Debit	Credit
4001 - Sales Type B	4500.00
3200 - Retained Earnings		4500.00

Step 4 - Check the P&L nominal codes

Select Nominal codes then choose Trial balance.
Select Preview then press Run.
In the Criteria window, from the Period dropdown list, choose Brought forward then press OK.
Check the report for any values shown against profit and loss nominal codes.

By default, these nominal codes range from 4000 to 9999.

The procedure is incomplete if values remain on profit and loss nominal codes. Check the brought forward Trial Balance and repeat steps 3 and 4.

The adjustments were successful if there are only balance sheet nominal codes listed.

Effect on Archives

If you create a year-end archive and then make corrections, the archive won't update. This makes it unrepresentative of your accounts. It's recommended that you create a new archive.

Bespoke training is available

Get extra support with bespoke one-to-one sessions from a Sage expert, built around your needs.
Leave your details and we'll be in touch.