Enabling Average Balance Processing
Average balance processing is enabled by selecting the Enable Average Balances option on the Set of Books form. Once average balance processing is enabled, General Ledger automatically stores the aggregate balances which are used to calculate average and end-of-day balances.
Transaction Calendar
A transaction calendar is defined using the Transaction Calendar form. When you first define a transaction calendar, you specify a name and an optional description. Using this information, General Ledger creates a transaction calendar which includes an entry for every calendar day in the range of dates which exist in your General Ledger. Each entry includes three items:
- Date: the actual calendar date.
- Day of Week: the day of the week.
- Business Day indicator: shows whether the entry is defined as a business day. The indicator defaults to Yes for Monday through Friday and No for Saturday and Sunday. You can change the initial default values to suit your own needs.
After the transaction calendar is created, you should specify your holidays by changing the Business Day indicator to non-business day.
Transaction calendars and accounting calendars are completely independent of each other. For example, you might have one accounting calendar, shared by your parent company and all its subsidiaries. However, each subsidiary might use a separate transaction calendar to accommodate their different Holiday schedules.
Set of Books
You use the Set of Books form to define the parameters of a set of books, such as Accounting Calendar, Functional Currency, and Chart of Accounts. If you choose to enable average balance processing, you must specify additional information on the Set of Books form, such as:
- Transaction Calendar: use to ensure that transactions are posted only to valid business days.
- Non-Postable Net Income Account: assign an account which General Ledger will use to capture the net activity of all revenue and expense accounts when calculating the average balance for retained earnings.
Non-Postable Net Income Account
Retained earnings contains two components for any interim accounting period:
- Current account balance, which is equal to the final closing balance from the previous year.
- Net income, which is the net of all revenue and expense accounts.
General Ledger calculates the average balance for retained earnings the same way that it computes average balances for any other account. However, since the system does not maintain average balances for revenue and expense accounts, some special processing takes place to handle this particular component of retained earnings.
General Ledger uses a special non-postable net income account (similar to a summary account) to capture the net activity of all revenue and expense accounts. The account is treated as a balance sheet account, with account type of Owners' Equity. Its three stored aggregate balances are used to compute the net income impact on the retained earnings average balance for any given period, quarter, or year.
Note: You can also use the non-postable net income account in your reports and on-line inquiries.
Additional Information: The primary difference between the non-postable net income account and other balance sheet accounts, is that its balance does not roll forward when you open a new year. Instead, General Ledger resets the account to zero when revenues and expenses are closed out to retained earnings at the end of the year.
