Closing the year in Business Central comes down to four stages, in this order. Finish the year’s entries. Run the cost adjustment if you hold stock. Check the numbers. Then close: create next year’s accounting periods, close the year, run Close Income Statement and post the journal it creates. Microsoft notes that you are not required to close a year, but closing makes the system easier to work with, and no transaction detail is lost.
A few terms first. Business Central says fiscal year for what most UK firms call the financial year, and divides it into accounting periods, usually months. Posting means recording an entry in the general ledger, your main set of accounts. The income statement is your profit and loss. Closing it moves the year’s profit or loss into retained earnings on the balance sheet. A batch job is a task that processes many records in one go. To find any page, report or batch job named below, press Alt+Q or select the search icon, then type its name.
Stage 1: finish the year’s entries
Post every sales and purchase invoice and credit memo for the year, and all receipt and payment journals. Update and post your recurring journals, the ones that repeat each period, such as rent. Reconcile your bank accounts. If you have fixed assets, post the year’s depreciation. Post your accruals, prepayments and other adjusting entries.
If you trade in other currencies, enter the year-end exchange rates and run the exchange rate adjustment. It restates open foreign currency balances at the new rates, and you can preview the effect before posting.
Bring VAT up to date. The year end does not change your VAT quarters, but the year’s VAT entries should all be posted.
Stage 2: run the cost adjustment if you hold stock
Business Central calls stock inventory. When the cost of an item changes after you have sold it, for example because a freight invoice arrives after the sale, the sale should carry that extra cost. Cost adjustment does this. It passes cost changes from purchases through to the related sales, so your cost of sales and your stock value are right.
Run the Adjust Cost - Item Entries batch job. Microsoft recommends running it for all items, and using its filters only to shorten the run or to fix one item. Depending on the Automatic Cost Adjustment setting on the Inventory Setup page, Business Central may already adjust costs as you post. Running the batch job before the year end catches anything left over.
Next, unless Automatic Cost Posting is turned on in Inventory Setup, run Post Inventory Cost to G/L. This posts the adjusted values to the general ledger. If you clear its Post field, it prints a test report instead, which makes a safe first run.
Then check the result. The Inventory - G/L Reconciliation page compares stock values in your item records with the general ledger and shows any difference. The Inventory Valuation report shows stock values, and the increases and decreases, for a period you choose.
Timing matters. A cost adjustment entry takes the posting date of the original entry, unless that date falls in a closed period or before the Allow Posting From date. In that case it posts on the first open date instead. So run the cost adjustment before you close or lock the year, or the corrections will land in the new one.
For more detail, the Inventory Cost Adjustment page shows each item’s status, and the Cost Adjustment Logging field on Inventory Setup logs each run.
Stage 3: check the numbers
Print the reports you need for the accounts and the audit. Useful ones include Trial Balance, Closing Trial Balance, which shows this year against last, and Customer - Trial Balance and Vendor - Trial Balance. Business Central calls suppliers vendors. These two reports help you check customer and supplier balances against their control accounts in the general ledger. Agree any expected adjustments with your accountant now.
Stage 4: close the year
- On the Accounting Periods page, choose Create Year. Enter the start date of the next financial year, 12 periods and a period length of 1M, then choose OK. Business Central will not let you close a year until the next one exists.
- On the same page, choose Close Year. It closes the earliest open year and asks you to confirm, so choose Yes. The year’s periods are marked closed and date locked, and this cannot be undone.
- Run Close Income Statement. On its request page, the options screen that opens first, choose the general journal batch to receive the closing lines and your retained earnings account, then choose OK.
- Open General Journals, select that batch, review the lines and choose Post.
Close Income Statement creates lines that reverse the year’s balance on every income statement account. They are dated on a closing date, a special date between the last day of the old year and the first day of the new one, so your normal period figures stay correct. When you post, each income statement account goes to zero and the year’s result moves to the balance sheet. If you left the retained earnings account blank, add the balancing line yourself before posting. If you use an additional reporting currency, a second currency some firms report in, the job posts directly instead.
Lock the year, and handle late adjustments
Closing a year does not stop anyone posting to it. To do that, set the Allow Posting From and Allow Posting To dates on the General Ledger Setup page, which apply to everyone. For exceptions, such as the person posting audit adjustments, set dates on the User Setup page, which override the company dates. You can set these before or after the close, as long as the cost adjustment has run first.
You can still post to a closed year later, for example for audit adjustments. Business Central marks these as prior-year entries. Run Close Income Statement again and post the new journal, so the adjustments reach retained earnings. You can repeat this as often as you need.
Your first year end
Spark 365 works with UK finance teams on Business Central. If you would like someone alongside you for your first close, or a check of your cost adjustment setup before you start, we are happy to help.