Hi! I’ve been self-studying ERPNext and i am now in Accounting module. I understand that for new setup of a company from a legacy system, i need to use the Opening Invoice Creation Tool and Stock Reconciliation (or Stock Entry) to transfer the balances of accounts from the legacy system to ERPNext. On the end of the Fiscal Period, i need to create and submit the Period Closing Voucher so that my P & L accounts will be closed and the net amount will be transferred to a liability or equity account.
My questions are:
The account that holds the P & L net amount should be closed against the Owner’s Equity account to reflect the new capital of the owner. Is this automatic once i submit the Period Closing Voucher? Or i still need to do something to update the OE account?
After submitting the Period Closing Voucher, are there still other things to do before i can start working under the new fiscal period? What are they?
After closing the fiscal period and ready to work on the new fiscal period, do i need to run again the Opening Invoice Creation Tool? My Balance Sheet accounts balances from the last fiscal period are intact (only the P & L accounts are closed and zeroed), they only need to be continued on the new fiscal period.
To close the Fiscal Year you use the tool (Period Closing Voucher), where you assign the OE or Liability account to close against P & L account balanaces.
On submit the document, the fiscal year journal entry is created automatically. Nothing else is required.
You are ready to keep working because the new fiscal year is generated automatically too.
After closing the fiscal year, all the P & L account start on balance 0 for the new fiscal year.
But your Asset and Leability account keep their balance so you don´t need to use Opening Invoice Creation Tool. This tool is used only to load the initial balances of payable and receivable account when you begain using the ERP and never more on a regular use.
If you still have doubts let me know.
Thanks for the reply! I really appreciate it!
I have further questions that I hope you don’t mind asking you:
Since my Balance Sheet accounts keep their balances at the start of the new fiscal period, does the OE or Liability account I used in the Period Closing Voucher will just keep on increasing and decreasing every time I close a period (if I keep on using the same account)? Will it never be zeroed out at the beginning of the new fiscal period? Will the balance of this account be transferred to Owner’s Equity account? This account contains the net of P & L which is supposed to be added or deducted from the Owner’s Equity account after closing a fiscal period.
On the beginning of a new company, I used Temporary Opening account to bring the Balance Sheets accounts of the legacy system into ERPNext. Will this just be kept in the ledger throughout and never be zeroed out and moved to a permanent account?
This tool is used only to load the initial balances of payable and receivable account when you begain using the ERP
- Can I not use it for the initial balances of my OE accounts?
Of course i am glad to help you as I can.
- When Fiscal Year close only P & L accounts go to 0.
So you will have a clean Asset = Liabilities + Equity
If your Incomes are higher than your Expenses you can apply the balance to lower a Liability or Equity account.
If your Expenses are higher the balance will go against more debt (Liability) or owner´s equity (basically the debt of the company with the owner).
So a debt just become 0 when is canceled.
To a better explanation I´ll referer to this links that contain more information.
- This link will explain why temporary openning accounts become 0.
- I don´t think so.
This tool solve casses:
If it´s payable/receivable account with balance you can treat it as a unpaid invoice so it charges in the account assigned to a party.
After when you start trading just can cancel the old debt easily with a regular Payment Entry (o Journal Entry).
All the new credits or debits will be recorder with your daily transactions (sales, purchase invoices, journal entry an so on).
Let me summarize what I learned so far in starting the Accounting module for a new company:
- Opening Invoice Creation Tool - for receivables and payables of old legacy system
- Stock Reconciliation (or Stock Entry) Opening Entry - for existing stocks
- Journal Entry Opening Entry - for other Balance Sheet accounts aside from receivables and payables (they are already entered in step 1).
For closing fiscal period:
- Period Closing Voucher
Am I correct?
What else am I missing?
Remember Open Invoice Creation Tool it is for previus unpaid invoices.
But sometimes is practical treat the rest of the payable/receiveable old balances as a unpaid invoice to easily cancel it.
The tradicional way is upload the unpaid balances of payable/receivable account that are not from invoices on the Journal Entry Opening Entry.
Both ways work so you or your accountat can decide which one fits better.
Remember you need to create the Fixed Assets to match with your fixed assets account, accumulated depreciation and depreciation expenses.
Thanks a lot! You are such a big help!