As we approach an end of the financial year 2024-2025, all businesses need to close their financial records are properly closed and finalised. In ERPNext, this process is managed using a period closing voucher entry, which helps businesses to transferring your profit or loss to the retained earning account and closing the book for a particular fiscal year.
In this blog we will explore:
- What is a period closing voucher in ERPNext?
- Why It is Important?
- How to create a period closing voucher in ERPNext?
- What are the best practices for financial year closure?
What is the period closing voucher in ERPNext ?
Period closing voucher is a tool in ERPNext that allows businesses to transfer theirs profit or loss from the income and expense account to the retained earning account at the end of the financial year. This ensures that the profit and loss statement starts a fresh in a new financial year while preserving an old financial data in the balance sheet.
Why a period closing voucher is important?
Period closing voucher is important as below:
- PCV is increase a financial report accuracy. It ensures that the profit or loss from the current year is correctly carried forward.
- Many accounting standard require proper closing books at the end of a financial year to maintain a compliance in a better way.
- It clears the profit and loss accounts, making a way for new financial year transactions.
- Proper closure of accounts helps businesses in smoother audit and better tax filing.
How to create a period closing voucher in ERPNext?
Follow the below steps to close your financial year in ERPNext:
1: Navigate to a period closing voucher list by searching a period closing voucher over a search bar.
2: Enter a required details:
- Posting date: Posting date will be probably a 31 March 2025.
- Company: Choose your company.
- Fiscal Year: Select a fiscal year you want to close.
- Start date & end date: Both dates will comes automatically upon a selection of a fiscal year.
- Closing account head: Choose a retained earning account or equivalent account in your chart of accounts.
3: Validate & submit
What are the best Practices for Financial year closure?
- Before closing, ensures that bank reconciliations, vendor payments and customer dues are properly reconciled.
- Check your profit and loss, balance sheet and general ledger reports for discrepancies.
- Ensure that all tax obligations are recorded and settled before closing.
- To prevent an accidental modifications, lock the fiscal year closing.
Conclusion:
The period closing voucher in ERPNext simplifies the financial year-end process by ensuring a smooth transfer of profit or loss to the retained earning account. By following the best practices, businesses can ensure accuracy and compliance while preparing for a new fiscal year.