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At some point after each financial year, your balance sheet must be balanced by transferring the net profit (or loss) to equity in the general ledger. At all times within Accentis Enterprise, Assets = Equity + Liabilities + (Net profit/loss). Usually at the year, the net profit or loss is journalled to equity so that Assets = Liabilities + Equity.
When you roll over from one financial year to another in Accentis Enterprise, it is very common to roll over to a new financial year before the final end of year profit transfer has been done. This is quite okay, but it will mean that you will usually have to log in to the prior year database to perform the journal and then bring the balances forward to the current financial year in a single, easy step as shown below.
Why isn’t the journal done automatically by Accentis Enterprise?
Different companies have different requirements when transferring their net profit to equity. Some companies prefer to do it monthly, others quarterly, while most will do it as an annual adjustment after all other transactions have taken place such as income tax, depreciation, etc.). It is for this reason that Accentis Enterprise has left this as a single last step to balancing your books for a financial year.
When should it be done?
The Net Profit transfer journal can be done at any time after the financial year end but should be done as the very last transaction – after all other adjustments have been made by yourself or your accountants. Before performing the net profit transfer to balance your system, you must ensure that all other transactions that can affect this net profit have been done such as:
- Income tax calculations
- Depreciation calculations
- Interest charges or income
- Dividend payments (incoming)
Before you perform the transfer of net profit to equity, you must also know what your net profit is. The simplest way to find this figure is to run a profit and loss report. Try to run a report that shows net profit to at least 2 decimal places (preferably 4). The best profit and loss report to run is CTRL-SHIFT-R, SA4083 (General ledger > Financial reports > Profit and loss).
How do you transfer Net Profit to equity?
The actual method used to transfer net profit to equity is very simple: it is done using a single journal entry dated June 30 of your financial year. It must be performed in the database that relates to the actual financial year in question.
To create the journal for the net profit:
- Ensure you are currently logged into the database for the same financial year for which you are transferring the profit (e.g. this will usually be the prior financial year to the current one)
- Run a profit and loss report for the financial year (e.g. CTRL-SHIFT-R, SA4083) and confirm the final net profit figure.
- Go to General Ledger > Manual journal entry
- Click New
- Fill in the date that relates to the end of the period for which you are reporting your net profit
- Fill in the amount with your net profit
- The Debit account will be in Other Expenses and called Net profit transfer (the account code may differ depending on your system)
- The Credit account will be retained earnings or current earnings (check with your accountant)
- Update the journal
- Run a balance sheet report (e.g. SA3535) and confirm that there is no “Net profit (calculated)” reported
- Log in to the current year database
- Go to General Ledger > Setup > Transfer prior year balances
- Run report SA2427 and confirm that the opening balances of your balance sheet total to $0
Can you do more than one transfer?
Yes , but it is not recommended. The profit transfer journal should be the final journal done in your system. If after performing the journal you have further adjustments to make, then we recommend you delete the original transfer journal and add a new one.
The golden rule is that at the end of the financial year, your total net profit (including this transfer) must come back to $0. This is proof that your balance sheet now balances and you are ready to transfer the closing figures to the next year.
What does the final transfer journal look like?
Here’s an example of an end of year profit transfer journal:
What if the user doesn’t have permissions to enter a journal in the prior year?
After an end of year rollover, all write permissions are removed from all users to ensure that they do not inadvertently modify prior year data. To add a journal to the prior year, you may have to re-add permissions to the user to do so. Do this as follows:
- Go to System > User > Permissions
- Select the user who will be doing the journal
- Click Edit
- Select the General Ledger group on the right
- Down the bottom, click “Administrator” to give full permissions
- Update
This user will now have access to add an end of year profit transfer journal.
What if a Journal Lock Date has been applied and the user doesn’t have permissions to remove it?
After an end of year rollover, all write permissions are removed from all users to ensure that they do not inadvertently modify prior year. If a Journal Lock Date has been applied to the system, then you may also need to re-add permissions to be able to edit System Preferences to remove the journal lock date in order to post your journal to the required date. Set permissions for the System Preferences as follows:
- Go to System > User > Permissions
- Select the user who will be doing the journal
- Click Edit
- Select the System group on the right
- Down the bottom, click “Administrator” to give full permissions
- Update
You will now have permissions to go into System > Preferences > General ledger > Journal Lock Date and remove the date so that you can post the journal.
