There is no formal period end closing in Sage 50 within an open fiscal year. There are, however, several important steps that we recommend all users should complete before issuing and filing financial statements for that period. Proper period end closing procedures can prevent headaches down the road if followed consistently.
- General Ledger – A general ledger trial balance should be printed (on paper or to the screen) to verify that the total debit and credit balances are the same. Sage 50 can sometimes go “out of balance” for various reasons, with significant consequences for financial statements.
- Bank Accounts – All bank accounts should be reconciled using the “Account Reconciliation” menu choice under Tasks in the top menu of Sage 50. If your bank is listed among the banks that can provide an electronic statement in a format that Sage 50 can read, the reconciliation process can be very simple. If your bank is not on the list, in many cases you can still export the statement from the bank’s website and then import that file into the Sage 50 bank reconciliation screen, simplifying the clearing process.
- Accounts Receivable – The accounts receivable subsidiary ledger (A/R Aging Report) should be reconciled to the accounts receivable account in the general ledger (or to the general ledger trial balance), verifying that the same balance appears in both the general ledger account and the accounts receivable aging. The Aging Report serves as the “proof” for the summary balance in the Sage 50 General Ledger. The Aging Report should also be reviewed for any negative balances, and corrected as needed; negative values on the A/R Aging can often be a sign of errors, created either by the user or by the system. All past due balances on the A/R Aging should be reviewed, for either dunning calls or possible write offs.
- Accounts Payable – The same steps for Accounts Receivable should be applied to Accounts Payable:
- Reconcile the A/P Aging Report to the same balance in the accounts payable account in the general ledger (or to the general ledger trial balance).
- Review the A/P Aging Report for any negative balances, and correct as needed
- Review Past due balances on the A/P Aging Report and document (perhaps via a note on the electronic record) the reason for the overdue balance.
- Inventory – The inventory subsidiary ledger (Inventory Valuation Report) should be reconciled to the same balance as the inventory account(s) in the general ledger (or general ledger trial balance), and any negative balances on the report should be verified or corrected.
- Exchange Account – If there are any “exchange accounts” in use in your system, all items composing the exchange account balance should be identified and reviewed. Any items not belonging there should be adjusted out via a general journal entry.
- any withheld payroll tax accounts showing a debit balance,
- any income accounts showing a debit balance,
- any cost of sales or expense accounts showing a credit balance.
- any balance that is obviously too large for the account, such as bank charges showing a value of $500,000.
- Incorrect Balances – All account balances in the general ledger (or general ledger trial balance) should be reviewed for any obvious incorrect balances. If any are questionable values are discovered they should be corrected via a general journal entry, or by reopening and correcting the transaction that created the incorrect balance. Some common examples are:
Financial statements should be printed and saved, either electronically or on paper, for future reference. At a minimum, the balance sheet and an income statement should be printed. Prior to distributing the statements to outside parties (banks, board members, key investors, etc.) several items need to be checked:
- On the Balance Sheet the total assets should equal the total liabilities plus total capital.
- The year to date net income from the Income Statement should be the same as the net income amount in the capital section of the balance sheet.
TriStar Data Systems has years of experience in helping clients to create and maintain proper financial records. Don’t hesitate to give us a call at 610-941-2116 or email us at email@example.com if you have any questions about maintaining a healthy financial reporting system.