Year-End Closing Process in NAV/BC

At the end of every Fiscal Year, every Accountants around the globe have responsibility to complete Year End Closing Process Task, So in this article I'll cover step by step process to complete this task in MS D365 NAV/BC.

Before moving ahead always make ensure the below points:

1. All Year End Entries are made and Balances are Verified.
2. Before Closing the Year, Create New Fiscal Year.
3. Keep in mind, when you close Year End it's only going to close Income Statement Account, it's ignore Balance Sheet Account.

Step1: Accounting Period

To create a new Fiscal Year, go to Process --> Create New Year.

To Close a Fiscal Year, go to Process --> Close Year.

Note: When you close the year, it's just put a check marked in Closed and Date locked Box. It's not going to create any Journal Entries. Being grayed out signifies that this process can’t be undone. You can edit or post transactions in those (now historical) periods, but to keep the books clean, you’ll need to close the year again. This makes sure that all the accounts roll into retained earnings correctly.

Step 2: Close Income Statement

Note:

* It is always suggestable that Create a separate Gen. Journal Batch with Name Year End in the selected Gen. Journal Template. For example, “YE22” for the 2022 fiscal year. This step provides a quick and easy way to identify the journal entries for the closing.

* Set the Document Number to something easily identifiable, such as Year End Closing2022.

* Be sure the Retained Earnings account shown is the correct one.

* To keep things neat and concise, we recommend posting to Retained Earnings as Balance, especially if you have a lot of transactions. Selecting Detail will work well also, but it might make reading the General Ledger history overwhelming.

* If you are using Intercompany, be sure to enable Business Unit Code.

* Ensure ALL your Dimensions are selected so that they will all be closed properly.

Before moving ahead, Just want to brief. What is Retained Earning Account ?

Retained Earning Account: Retained Earnings Account is used to?carry forward the balance from one fiscal year to the next fiscal year. You can assign a Retained Earning Account to each P&L account in the chart of accounts (COA).

Example: Normally, when we create a Sales Invoice then our Sales Account i.e. Income Account is Credit, so when we close the Income Statement Entries will be:

Sales Account DR (Debit)

Retained Earning Account CR (Credit)

and Vice Versa in term of Expense Account.

Step 3: Journal Entries

Review the entries if its correct then finalize the process by clicking Post/Print, and then Post.

To Check, Go to General Ledger Entries.

What happened when user need to post entries in the previous Financial Year which is closed now, how system will impact these entries and how to identify it. Let's see it....

Note: Before Post such type of transaction make sure at General Ledger Setup and User Setup "Allow Posting from" and "Allow Posting to" should be blank or date should be in between Posting Date range, else system will throw an error i.e. Posting Date is not within your range of allowed posting dates.

Here I have created entries with posting date as 01/08/2022 and as we know FY 2022 is closed.

** Once you post Entries, System will take the same Posting Date but at G/L Entries there is one field with name "Prior-Year Entry", System will make that value "YES" so that we can identify that the transaction done after Closing the Financial Year **

** Run the Close Income Statement Report to update the Year End Closing Entries for the transaction **

END

Hope this will help.

Thanks for reading.