Understanding Interim and Year End Closing

This section discusses:

Interim versus year end closings.
Single versus multiple retained earnings accounts closings.
Closings that use book codes and balance sheet indicators.
Separate debit and credit options for opening and closing periods.

Although most companies must close profit and loss accounts to retained earnings only once a year, some companies may close as often as once a day. General Ledger enables you to run closing as frequently as need through interim (net income) closings. The system also provides year end closing on the Account and Alternate Account (statutory) ChartFields.

Interim and year end closings are similar in that they both close profit and loss (P/L) accounts to retained earnings. However, there are differences in the capabilities of each type of closing. This section identifies the differences and similarities of the two types of closings.

This table describes the differences between interim and year end closing:

Interim Close	Year End Close
Enables you to close periods within a fiscal year (for example, daily or monthly) on the Account ChartField. Because the intent of the interim close is to close P/L accounts, it is required that the Account ChartField be included in the CFV set.	Enables year end close. Closes the year that you specify on the Account ChartField, the Alternate Account ChartField, or both.
Define only one closing rule within a closing process group for processing.	Enables you to define more than one closing rule within a closing process group for processing year end close. This allows you to create closing accounting entries to accounts besides the customary retained earnings accounts.
Enables you to select some or all P/L accounts to be closed. Note: Because the intent of the interim close is to close P/L accounts, it is required that the Account ChartField be included in the ChartField value set (CFS).	Unless the Set Default Retained Earnings option is set to Off, all P/L accounts are closed. Note: This option is not available when the Balance Sheet Indictor option is selected.
Does not carry forward closing balances.	Carries forward closing balances to beginning balances for balance sheet accounts. If closing is not performed for all book codes and balance sheets, closing balances carried forward to beginning balances are balanced for only the set of accounts defined by the closed book codes or the closed balance sheets.
Creates journal entries that you post during or after the closing process.	Directly updates the ledger. Optionally, creates journal entries for those companies that require journal entries for any transaction that affects ledger balances. Note: When the Application Engine process (GL_YC) is used to close ledgers, this option is ignored, regardless of your selection.
Creates optional offsetting entries into alternative ChartField values.	Creates offsetting entries into source P/L ChartField values in the ledger. If using interim close with offsetting entries, then you must select the offset to the retained earnings account as the target retained earnings for the year end close.
Closes selected adjustment periods.	Automatically closes all adjustment periods for the year.
Includes Account in P/L ChartFields.	Includes Account or Alternate Account in P/L ChartFields.

In either interim or year end closings, General Ledger enables you to close P/L to a single retained earnings account or to multiple retained earnings accounts.

Closing to a Single Retained Earnings Account

When you close to a single retained earnings, you can close all P/L accounts to a single retained earnings account. You can also close the P/L accounts to a single retained earnings account and break the amount down by other ChartFields (for example, Project or Department). This flexibility enables you to track profit and loss more effectively.

All closing rules require the Account ChartField, the Alternate Account ChartField, or both. You can close only these ChartFields, or you can combine the Account ChartField with other ChartFields such as Department, Product, or Project ID. For example, if you want to track department-specific retained earnings, you combine the Account ChartField with the department ChartField. During the closing process, the department totals still close to a single retained earnings account, but the system generates separate ledger entries for each department.

Closing to Multiple Retained Earnings Accounts

When you close to multiple retained earnings, you distribute P/L to multiple retained earnings accounts based on appropriate criteria for the business. For example, you might distribute profit and loss based on specific P/L accounts or based on departments. You close a specific group of ChartField values to a single retained earnings account, but you close other specific groups of ChartField values to other single retained earnings accounts. ChartField value sets facilitate this process.

ChartField value sets enable you to define combined ChartField values that the system uses for source data during the General Ledger closing process. For example, you can create one ChartField value set for the income statement accounts used in interim closing and another set to use in year end closing. When you define closing rules for the interim close or the year end close, you select the appropriate ChartFields value sets.

Here is an example of closing to multiple retained earnings accounts. In this example, P/L accounts 41000 − 410010 and 410015 and 410016 close to retained earnings account 360100, and P/L accounts 410020 − 410029 close to retained earnings account 360200:

P/L Accounts	ChartFields Value Set	Retained Earnings Account
41000 through 410010	CFVS 1	360100
410015 410016	CFVS 1a
410020 through 410029	CFVS 2	360200

P/L Accounts

ChartFields Value Set

Retained Earnings Account

41000

through

410010

CFVS 1

360100

410015

410016

CFVS 1a

410020

through

410029

CFVS 2

360200

You can set up value sets that combine P/L account with the Department ChartField and the Product ChartField, or use whatever combination you need to track profit and loss.

Book codes are both an account attribute and balancing ChartField. You can use book codes to group Account ChartField values for the recording of transactions under different accounting rules in the same business unit and ledger. For example, you can use book codes to record corporate versus local transactions when different accounting rules apply. In this case, you might create the book codes C, L, and B to classify accounts as corporate (C), local (L), or both (B).

For accounts with book code values that can be overridden, you must select a book code to avoid receiving a warning message. A book code is fixed for an account that cannot be overridden, and the system enters it automatically. If you retain a book code for the offset, you must also retain it for the retained earnings ChartFields, and it must be a book code that can be overridden. For the default retained earnings account, you can select only a book code that can be overridden.

In addition, the PeopleSoft system comes with standard balancing attributes for Account ChartField values to segregate and maintain separate transactions within a business unit and ledger for BS (balance sheet) and OB (off balance sheet) transactions.

Use book code and balance sheet indicators to create subsets or groups of accounts within a ledger that correspond to different accounting rules. When the closing edit is run, the system verifies the values of the book code and balance sheet indicator for the retained earnings account.

When a retained earnings book code is fixed, either the account cannot be overridden or a fixed book code is entered. Only the entries from the source with the same book code are closed. Similarly, only the entries with the same balance sheet indicator value as the retained earnings account are closed.

Consider the following example. To close subsets separately, you must create ChartField value sets that specify the accounts that the system closes together. You use a book code, a balance sheet indicator, or both:

ChartField Value Set	Account	Book Code	Balance Sheet Indicator
CFV1	Account Rollup INCSTMNT	B	BS
CFV2	Account Rollup INCSTMNT	B	OB
CFV3	Account Rollup INCSTMNT	C	BS
CFV4	Account Rollup INCSTMNT	C	OB
CFV5	Account Rollup INCSTMNT	L	BS
CFV6	Account Rollup INCSTMNT	L	OB

Note: Check balances by running a query on period 0 for the book codes used for year end close. Year end close carries forward all ending balances to beginning balances for balance sheet accounts, including balances for both closed and open book codes.

On the Year End Close Options page, there are two options that you can use for year end close only when your database is configured for separate debit and credit:

Initialize DR/CR with Net Bal (initialize debit/credit with net balance): Select to populate account amounts in the opening period (0) for the year being opened with the net debit/credit balance from the year being closed.
Close DR/CR with Net Balance: Select to populate account amounts in the closing period 999 for the year being closed with the net debit/credit balance.
If you do not select these options, the debit balances and credit balances are treated separately—they are not netted for period 999 and period 0.

SeeUsing Separate Debit and Credit .

Setup for Opening and Closing Period Examples

In the following examples, the headings are:

Total is the amount stored in POSTED_TOTAL_AMT.
DR is the amount stored in POSTED_TOTAL_DR.
CR is the amount stored in POSTED_TOTAL_CR.

Assume the following balances at the beginning of year 20X6, which are rolled forward from the closing of year 20X5:

Account	Total	DR	CR
100000	30000	40000	−10000
210000	−20000	10000	−30000
360000	−10000	5000	−15000

Assume the following transactions occurred during the year 20X5:

Period	Account	Total	DR	CR
7	403000	−80000	3000	−83000
7	500000	65000	71000	−6000
7	100000	15000	17000	−2000

Period 999 Amounts if the Close DR/CR with Net Balance Option is Checked

Assume the equity account is 360000.

The close uses the total net amount. If the net amount is positive, it is recognized by the system as a debit and a negative offset amount (credit) is generated for period 999.

If the net amount is negative it is recognized by the system as a credit and a positive offset amount (debit) is generated for period 999.

The closing entries generated for period 999 for year 20X5 are net amounts:

Period	Account	Total	DR	CR
999	403000	80000	80000	0
999	500000	−65000	0	−65000
999	360000	−15000	0	−15000

Period 999 Amounts If the Close DR/CR with Net Balance Option is Not Checked

If the Close DR/CR with Net Balance option is not checked, the system generates entries for the DR amount and CR amounts separately.

The system generates an amount with a numerical sign that results in the sum of the DR amounts for the P&L accounts from period 1 to 999 to equal 0, and also generates an amount so that the sum of CR amounts for the P&L accounts from period 1 to 999 also equal 0.

The closing entries generated with opposite numerical signs in period 999 for the year 20X5 for the debit and credit columns are:

Period	Account	Total	DR	CR
999	403000	−80000	−3000	83000
999	500000	−65000	−71000	6000
999	360000	−15000	74000	−89000

Period 0 Amounts When the Initialize Dr/CR with Net Bal Option is Checked

If the Initialize DR/CR with Net Bal option is checked, the opening entries in period 0 for year 20X6 are:

Account	Total	DR	CR
100000	45000	45000	0
210000	−20000	0	−20000
360000	−25000	0	−25000

Period 0 Amounts When the Initialize Dr/CR with Net Bal Option is Not Checked

If Initialize DR/CR with Net Bal option is not checked, the opening entries in period 0 for year 20X6 are:

Account	Total	DR	CR
100000	45000	57000	−12000
210000	−20000	10000	−30000
360000	−25000	79000	−104000

Understanding Interim and Year End Closing

Interim Versus Year End Closings

Single Versus Multiple Retained Earnings Account Closings