Fiscal Years: are used to separate the accounting years from each other in an accounting software. A country’s legal authority have various rules about how these Fiscal Years should be setup. A Fiscal Year often follow a normal Calendar Year, Jan 01 – Dec 31. But it could also be a broken year, f.i. Jul 01 – Jun 30. Many countries allow you to have an initial prolonged year, f.i. Jul 01 2009 – Dec 31 2010.
When you start a new Company in accounting software, you should check that the Fiscal Years is setup correctly. If this is not your starting Fiscal Years, then you should start by creating the starting Fiscal Years. After you have corrected the starting Fiscal Years, you can delete other Fiscal Years if there are no transactions in them. Now set this new Fiscal Years on your company by selecting Setup tab, Company Setup.
If the first year is setup as Jan 01 2017 – Dec 31 2017 and your starting Fiscal Year should be Jul 01 2017 – Jun 30 2018:
Create a short dummy year, Jan 01 2018 – Jun 30 2018
Create another Year Jul 01 2018 – Jun 30 2019
Set the company to use this year
Close and delete the year Jan 01 2018 – Dec 31 2018
Close and delete the short dummy year Jan 01 2018 – Jun 30 2018
Create the correct broken Fiscal Year Jul 01 2011 – Jun 30 2012
Set this Fiscal Year Jul 01 2018 – Jun 30 2019 as active for the company
Click to save
When you have finished your year-end entries, you may close the Fiscal Year.
A closed Fiscal Year can no longer be used for entries.
When a Fiscal Year is closed, the difference between all asset and liability accounts are brought forward as a Journal Entry where the Default account for Retained Earnings is credited if this is a profit and debited if there is a loss. And the default account for Profit/Loss Year is debited if this is a profit, and credited if there is a loss). You can have as many Fiscal Years running in accounting software as you want, but for performance reasons you should not have more than needed (by your legislation). When you delete a Fiscal Year, the assets, liabilities and equities are brought forward. All other unneeded transactions such as documents are deleted.
