Sage 50 refers to the fiscal year as the year in which general ledger transactions take place. Sage 50 keeps two years of general ledger transaction activity open at one time. Each fiscal year has the same number of accounting periods, which you establish when initially setting up your company. Normally, you change accounting periods as you enter transactions. Fiscal years do not have to start at the beginning of the calendar year. For example, some companies may start their fiscal year July 1 and end it June 30.
Sage 50 refers to the payroll tax year as the calendar year in which payroll transactions (earnings) take place. If your fiscal year is operated based on the calendar year (starts January 1 and ends December 31), then you must close the payroll tax year first before closing the fiscal year.
After you close the fiscal year, all transactions posted to the General ledger in that year cannot be accessed or edited. However, ending balances and some limited historic information are available in reports, when requested.
When to Close the Fiscal Year
Usually there is no need to close a fiscal year exactly at the end of the last accounting period. Sage 50 keeps two years of transaction activity open at one time. For example, if your fiscal year is based on 12 accounting periods, then period 13 is the first period of the second open fiscal year. Period 24 is the last period of the second fiscal year.
We highly recommend that you wait to close the first fiscal year until near the end of the second fiscal year. You can operate your company in Sage 50's second open fiscal year (for example, periods 13-24). The first fiscal year (periods 1-12) holds the previous year's transaction detail and allows you to make adjustments, if necessary. You cannot move forward until you close the first fiscal year. After closing the first fiscal year, period 13 becomes period 1.
For example, if 2016 is the second of the two fiscal years, you must close the 2015 fiscal year soon to enter 2017 transactions.
Before Closing the Fiscal Year
Usually in the last accounting period of a fiscal year you need to make adjusting entries. These might include the following:
- Writing off customer bad debts
- Recording old outstanding checks reentered into the bank account as miscellaneous income
- Verifying that fixed-asset purchases and dispositions have been properly recorded
- Recording depreciation expenses
- Recording a physical inventory count and comparing to Sage 50's quantity on hand
- Managing outstanding notes payable and receivable items and recording or adjusting interest expense or income
Once the above adjustments have been made (if necessary), you are ready to begin closing the fiscal year.
Before you close the fiscal year, you should perform the following preliminary tasks:
- If you are using batch posting mode, you need to post and print all journals and the Yearly General Ledger report. This will help you determine if you are truly ready to close or if you need to work some with your general ledger beforehand.
- You need to print all open invoices and vendor and payroll checks.
- You should back up your company data (highly recommended).
To Close the First of Two Open Fiscal Years
- From the Tasks menu, select System, then choose Year-End Wizard. Sage 50's Year-End wizard prompts you for completion of any uncompleted year-end tasks. The wizard will remind you to print any journals, reports, invoices/checks you may have neglected to print. It will also prompt you to back up your data if you have not already done so. Tell me more about the year-end wizard.
Purge Unnecessary Data with the Purge Wizard
Purging is the process of removing inactive customers, vendors, employees, jobs, quotes, invoices, purchases, and so on from the records of a company; typically, you will purge data after closing the fiscal year. Purging reduces the size of the files of a company and frees valuable disk space for current and active data. This is usually recommended after closing a fiscal year to save disk space. Purging data is accomplished using the Sage 50 Purge wizard. Tell me more about the purge wizard.