The steps required to close a fiscal year in Dynamics NAV are relatively simple. First, accounting periods need to be closed via the “Close Year” function on the “Accounting Periods” page. Secondly, a journal needs to be created via the “Close Income Statement” process. The closing general journal that is created should be reviewed, then posted. If no future entries need to be back-posted into the closed year, then the process of closing your income statement into retained earnings is complete. Below I’ve listed some frequently asked questions (FAQs) that seem to come up each year as our customers conduct the closing process.
9 FAQs for Year-End Closing in NAV:
1: Does closing accounting periods restrict users from posting into those “closed” periods?
Actually, no. Closing the accounting periods is a way of letting NAV know that you are ready to run the “Close Income Statement” routine for the most recently closed year. Closing accounting periods in no way restricts users from making postings into these closed periods. Instead, use the general ledger setup and/or user setup’s posting date restrictions to restrict users from posting into the closed fiscal year.
2: Do I close accounting periods one month at a time?
No. In NAV, all periods within the fiscal year are closed at the same time when you run the “Close Year” function from the “Accounting Periods” page. Periods in NAV are not closed per month.
3: What do I do if I need to make additional back-postings to a closed year?
Open the posting date restriction up for your user setup record so that you are allowed to post into the closed year. Next, make the necessary back-postings. If any of these postings hit income statement accounts, you’ll need to re-run the “Close Income Statement” routine again to wash these back-postings into retained earnings. Note that all G/L entries posted into a closed year will have a checkmark in the “Prior-Year Entry” field so that you can later run a report filtered to only back-posted entries.
4: Why does NAV put a “C” in front of the posting date it assigns to the closing journal?
NAV posts the closing entries with a fictitious date that resides one day after your fiscal year ending date and one day before your next fiscal year starting date. For example, if you operate under a calendar year, NAV will post the closing entries on C12/31/XX rather than 12/31/XX. NAV posts the closing entries on this “C” date so that you can utilize a setting that can be found throughout NAV called “Include Closing Entries”. This feature allows you to be able to include/exclude closing date postings when running reports and pages that display financial data. So, for example, you could run an income statement as of 12/31 or C12/31 to get a “before” and “after” snapshot of the data pre and post close.
5: Should I close by dimension?
Closing by dimensions allows you the ability to close your income statement accounts into retained earnings more granularly (by dimension). Closing by dimension can result in a dramatically larger closing journal, especially if your company utilizes many dimensions. However, the upside of closing by dimension is that the posting will not only result in closing of the income statement by G/L account balance, but it will also do the same for each G/L Account/Dimension combination. For example, a company that closes by dimension can later run an income statement for a single department (dimension) and show a zero dollar balance per income statement account per the single department.
6: Why didn’t NAV close out all of my income statement accounts?
NAV will close out all G/L accounts that have an “Income/Balance” value of “Income Statement”. Prior to starting the closing process, it is very important to check the entire chart to make sure that all income statement accounts are marked as “Income Statement” and all balance sheet accounts are marked as “Balance Sheet”. Failure to do so can result in income statement accounts that NAV doesn’t close or worse yet, balance sheet accounts that get washed into retained earnings.
7: NAV seemed to have double closed my income statement accounts.
The double closing of the income statement occurs when the “Close Income Statement” function is run twice by accident. In such cases, the general journal’s closing entries are repeated a second time in the closing journal. Failure to notice these duplicate entries (and remove them) will result in a double set of closing entries being posted.
8: Why do my account schedules stop working when I run financial reports in the new fiscal year?
NAV’s account schedules count on there being accounting periods setup in the “Accounting Periods” page so that they can, for example, translate “period 1” = 01/01/15..01/31/15. So, as a general rule, each year when running the “Close Accounting Periods” function, you should also run the “Create Year” function as well (to create next year’s periods).
9: Will I be able to review the closing general journal prior to posting it?
In most cases, the answer is “yes.” Most of the accountants I work with like to review the closing general journal batch prior to posting it. It’s a good idea to check the posting dates and dimension values within the journal (see number 4 and 5 above). I’d also advise confirmation that all of your income statement accounts are accounted for within the batch (see number 6).
However, if your company happens to be maintaining an additional reporting currency, NAV will go ahead and post the closing batch automatically and you won’t have a chance to review the journal prior to posting. If you are unsure of whether or not your organization is using an additional reporting currency, you can check the “General Ledger Setup” page which holds the “Additional Reporting Currency” field. Depending on what version of NAV you are running, if you are using an additional reporting currency, you may have to temporarily remove any dimension value posting rules you have in place on your retained earnings G/L account until after the closing posting is complete.
Since the “General Ledger Setup” page is unique per NAV company, keep in mind that your organization may be tracking an additional reporting currency in some companies but not in others. Thus you may see different results when closing across different companies.
*This post was written for Dynamics NAV but the content directly applies to Dynamics 365 Business Central, which is the cloud product based on Dynamics NAV.