Year-end closing

[Cam Ellison]

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