Posting adjustments into the previous financial year

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

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, click Settings then click 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.

1. Click Nominal codes then click Journal entry.
2. Enter a Reference and Date.
   We recommend you use the last day of the previous financial year.
3. Enter the adjustments using the non-vatable tax code, by default T9 then click 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

1. Click Nominal codes then click Trial balance.
2. Select Preview then click Run.
3. In the Criteria window, from the Period drop-down list, choose Brought forward then click OK.
4. 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 to move the brought forward P&L balances to the Retained Earnings nominal code 3200. Use the last day of the previous financial year as the posting date.

Example

The following brought forward value appears on the Trial Balance:

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

Step 4 - Check the P&L nominal codes

1. Click Nominal codes then click Trial balance.
2. Select Preview then click Run.
3. In the Criteria window, from the Period drop-down list, choose Brought forward then click OK.
4. 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. 

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