Closing and Re-Opening Financial Periods

In this article:

• What the System Does Automatically
• What You Complete Manually
• Before Closing a Period
• How to Manually Close a Fiscal Period
• If You Don’t Close a Period
• Re-Opening a Closed Period

This guide explains how financial periods work in Legal Accounting, including what the system automatically calculates and posts at year-end, what actions users must complete manually and how and when periods are locked or remain editable.

What the System Does Automatically

The system performs automatic year-end actions when either of the following occurs:

• You manually close the fiscal year
• The fiscal year-end date set in Admin settings is reached

These actions are required to ensure accurate financials for the next year and cannot be deleted. When triggered, the system performs the following actions:

1. Calculate net income or net loss
   • Revenue minus Expenses, result is either:
     • Net Income (credit balance), or
     • Net Loss (debit balance)
2. Reset Revenue and Expense accounts to zero.
3. Move the net result to the correct equity account:
   • Corporation
     • Net Income or Loss is posted to Retained Earnings
   • Partnership / Sole Proprietor
     • Net Income or Loss is posted to Income for Allocation
4. Carry forward permanent balances. Only balance sheet (permanent) accounts continue into the new fiscal year

Important Admin Setting

If Retained Earnings or Income for Allocation is also being zeroed out, this is controlled by an Admin option. To review or change this:

1. Go to Admin > Firm > Features
2. Find “End of year adjustment: only zero income and expenses (not retained earnings)”
3. Turn this OFF if you want Retained Earnings or Income for Allocation to remain intact

How These Entries Appear

All system-generated entries are labeled:

“Automatically created close period adjustments” in the General Ledger"

If the fiscal year is manually closed

• Entries are locked and cannot change

If the fiscal year-end date is reached automatically

• Entries continue updating as new transactions are posted
• Entries are locked only after the year is formally closed

What You Complete Manually

At year-end, users are responsible for the following actions:

1. Review the balance in:
   • Income for Allocation (Partnership / Sole Proprietor), or
   • Retained Earnings (Corporation)
2. Decide how net income or loss should be distributed
3. Create manual journal entries to allocate amounts to:
   • Owner, partner, or capital equity accounts
4. Confirm balances:
   • Allocations are correct
   • Equity accounts reflect the year’s results

Before Closing a Period

Before closing any period, confirm the following are complete:

• All billing is finalized
• All bank payments, transfers, and cheques are entered
• All bill adjustments are posted
• Operating and trust accounts are reconciled
• General ledger accounts are reconciled
• All required journal entries are entered

How to Manually Close a Fiscal Period

Follow these steps to close a period:

1. Go to Financials > Close Period
2. Set the End of Period date
3. Toggle Close Fiscal YearON
   NOTE:  If you only want to close a month or period (not the fiscal year), leave Close Fiscal Year toggled OFF.
4. Click Submit. Doing this will lock the period. No further changes can be made to that period.

If You Don’t Close a Period

If a period is not manually closed:

• The system will still perform year-end adjustments when the fiscal year-end date is reached
• These adjustments continue updating as transactions change
• The period remains unlocked and editable

To change the fiscal year-end date:

1. Go to Admin > Firm > Features
2. Update the Fiscal End of Year date
3. Click Save.

Re-Opening a Closed Period

If changes are required after closing:

1. Go to Financials > Close Period
2. Expand Previous Periods
3. Locate the period
4. Click the trashcan icon
5. Confirm Reopen Period