How does the year end closing entry work?

Created by Travis Lander, Modified on Thu, 4 Mar, 2021 at 12:33 PM by Travis Lander

Description

This article explains how the closing of the Accounting Period books the Retained Earning entry, and how to map the Current Period Net Income to the Balance Sheet.

Year End Closing Entry

When an accounting year is closed, the year-end closing entry is automatically calculated to clear all journal entry lines booked against Revenue and Expense Type Ledger Accounts during the Accounting Period. The offset is recorded in Retained Earnings.

This entry is booked as of the first day of the following Accounting Period (e.g. 1/1 for calendar year ends) to the Closing ledger.

Booking Current Period Net Income

In order to include current period net income or loss in the balance sheet, make sure to include the Current Period Income Formula in the report mapping in the Report Editor. This can be included in the Retained Earnings financial statement line (called Report Group, in SoftLedger), as shown below:

The year-end closing entry ensures this amount is reflected in Retained Earnings for future periods (i.e. the closing entry rolls Current Period Income into Retained Earnings).

For more information, contact your support team at support@softledger.com.