Table of Contents
1. Changing dates of financial reporting periods
3. A Guide to Year-End Processes
3.1 Managing Reporting Periods
3.2 The Automated Year-End Process
3.3 Understanding Retained Earnings Balances
1. Changing dates of financial reporting periods
Reporting periods can be updated at any time and will not affect any existing transactions posted to those periods. Reporting periods set the dates in which transactions can be created. You cannot process any transactions without a period that includes the current date.
Reporting periods also appear as date ranges to select from on most Clear Books reports. Try not to have overlapping periods and for clarity keep the periods in chronological order.
Reporting periods are listed on the Settings > Accounting > Periods > Reporting Periods menu.
If you have more than 1 reporting period you can make changes by deleting the period using the delete icon, shown in the Options column. Deleting a period does not remove any transactions. Once the period is deleted, you can re-add with the correct dates.
If you only have 1 reporting period then you can edit the date range using the edit icon under the Options column.
2. Locking accounting periods
Locking a financial year means that no transactions during the specified date range can be created or modified. It is best to do this at the end of a tax year.
This will be based on the invoice/bill date or the accrual date (if you have the accrual feature enabled) i.e. if you create an invoice with an invoice date (or accrual date if enabled) within a locked period, the system will prevent you from confirming the invoice.
Reporting periods are listed on the Settings > Accounting > Periods > Reporting Periods menu.
Click on the padlock icon to the right of the period you wish to lock. Any reporting period that you lock will display the locked padlock icon.
If you want to make changes to a transaction in a previous period, you must unlock all reporting period from the present back to the year in which the transaction falls.
2.1 Locking Custom Periods
You can also define your own custom locked period date ranges, for example for VAT quarters, by clicking on the Locking Periods tab.
Enter your own custom date range and hit Add.
You also have the option to lock all future dates, preventing transactions from being created in future, by ticking the checkbox and clicking Save.
Please note: To edit a historic invoice, you must unlock the relevant reporting period. This also requires all subsequent reporting periods, up to and including the current tax year, to be unlocked. For example, if you unlock period 23/24 to edit transactions, periods 24/25 and 25/26 (up to the current tax year) must also be unlocked.
3. A Guide to Year-End Processes
Properly setting up your financial reporting periods is crucial for automating your year-end process. This guide explains how to manage these periods and what happens during the automated year-end procedure.
3.1 Managing Reporting Periods
Setting Up and Locking Periods
Before your financial year ends, make sure your reporting periods are set up correctly. Once a financial year is complete, you can lock the reporting period to prevent any new transactions from being entered. This ensures the integrity of your financial data for that year.
3.2 The Automated Year-End Process
How Retained Earnings Are Updated
At the end of a financial year, Clear Books automatically updates your retained earnings. The system calculates the new Historic retained earnings balance for the upcoming year by combining three values from the completed year:
- Historic retained earnings
- Cumulative profit/loss
- Dividends
For example, if the previous year's balances were:
- Historic retained earnings: £0
- Cumulative profit/loss: £2,995
- Dividends: -£200
The new Historic retained earnings balance for the new financial year will be £2,795. This combined value automatically appears on the balance sheet for the new financial year.
3.3 Understanding Retained Earnings Balances
Why Balances May Differ Between Reports
Sometimes, you might notice a difference between the Historic retained earnings balance on the Trial Balance or Balance Sheet and the balance shown on the Transactions report. This is a common point of confusion, but there is a clear explanation.
The key difference lies in how these reports calculate the balance:
- Trial Balance and Balance Sheet: These reports show the total calculated balance of retained earnings. This includes the automated year-end movement that combines the profit/loss and dividends.
- Transactions Report: This report only displays transactions that were manually entered and directly debited or credited the retained earnings account. The automated year-end process does not create a journal entry and, therefore, does not appear on this report.
In short, the automated year-end movement is reflected in the total balance on the Balance Sheet and Trial Balance but is not a physical transaction that appears on the Transactions report.