Year-end closing
Cam Ellison
cam at ellisonpsychology.ca
Thu Jan 17 23:04:03 EST 2008
On Thursday 17 January 2008 16:17:56 Gerry Thompson & Susan Phillips
wrote:
> I realize this is a newbie question but could somebody point me to
> information on:
>
> What is year-end closing?
First off, IANAA. I may get flamed, or at least corrected for some or
most of this. Very roughly, it's a process of zeroing out specific
accounts at the end of the fiscal year. For my business, I need to do
this, because it's easier to keep track of current expense and revenue
amounts.
> Why is it important?
See above. It's not important, IMHO, for personal accounts. Doing a
proper year-end close keeps my accountant happy, because they can see
exactly what the previous year was, among other things.
> How is it done?
Well, how I do it is to run a Trial Balance to get the actual
expenditures and revenues for the fiscal year. Then I do a split
transaction that transfers various subtotals to the parent account.
Something like this. Suppose you had a category under Revenues called
Strategic Planning (I sometimes do this, though I don't actually track
it separately), and under that Clients A, B, and C. The tree would
look like this:
Revenues
|_______Strategic Planning
|_____________ Client A 42,500.00
Client B 11,300.00
Client C 21,275.00
Each client would, over the course of the year, yield certain revenues,
the totals of which I have indicated. At the year-end close, I would
post a negative amount against each client's total, and the sum of the
three to Strategic Planning, so you get this:
Revenues
|_______Strategic Planning 75,075.00
|_____________ Client A 42,500.00 - 42,500.00 = 0.00
Client B 11,300.00 - 11,300.00 = 0.00
Client C 21,275.00 - 21,275.00 = 0.00
Conversely, you might want to put all of the fees against Revenues.
I expect others will chime in now, and give you a better idea. I'd say,
unless you are running a business, don't bother.
Cheers
Cam
--
Cam Ellison Ph.D. R.Psych. #01417
Cam Ellison & Associates Ltd.
Management Psychology
RR 22 3446 Beach Avenue
Roberts Creek BC V0N 2W2
Phone: 604.885.4806
Fax: 604.885.4809
Cell: 604.989.0635
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