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• Ledger Restart (docx)

WARNING: the following procedure is dated. Not removed because some people are still referring to it. (2019-04-30 cm) Problem Summary: The starting ledger balances were not initially entered in System 5 on, or shortly after, the ‘go live’ date, and you have been using System 5 for months (or even years). Your financial reports show account balances that are incorrect. You need to have these reports show the true ledger balances so that the financial reports will be meaningful.

Solution Summary: On the first day of the month you have chosen to correct the ledger balances, temporarily change your current financial year so that it ends the month prior to this month. Then close this shortened financial year in order to automatically zero out your income and expense ledger balances. Print a Trial Balance for the new temporary financial year. Create a journal entry dated the last day of the month prior to this new fiscal period and reverse all the balances remaining in the accounts shown in the Trial Balance. Then create another journal entry dated for the first day of the new financial period and enter the correct starting balances for all the balance sheet accounts in your general ledger. Finally readjust the financial year end to be your actual financial year end.

The steps to follow:

1. On the first day of the month you want to start using the corrected ledger: 2. go to Setup Wizard > General Accounting > Financial Years 3. adjust your current financial year to end in the month prior to the current month

Example: You want to start using the ledger in May 2006, set the financial year end to be April 2006

2. Select the following menu path: General Ledger > Closing Routines. Click [Close Ledger Year] as shown in the following figure:

Explanation: Closing the financial year automatically zeroes out the income and expense accounts (all entries on the income statement) and posts the difference to Retained Earnings (account 3500).

3. Print a Trial Balance for the month you are starting the ledger. Explanation: The example below shows the May 2006 trail balance (the end of the fiscal period is April 2006). Each one of the account balances displayed has to be reversed in order to end up with a zero balance in each. Since all of the Revenue (all 4000 accounts) and Cost (all 5000 and 6000+ accounts) ledger accounts have been automatically zeroed out and the difference moved to retained earnings when the ledger or financial year was closed, the only accounts you will see here are balance sheet accounts (1000 to 3000 series of ledger accounts).

4. Add 2 new ‘suspense’ accounts to your General Ledger if you don’t already have them i.e. 2990 (A/P Suspense) and 2995 (A/R Suspense). Explanation: The Accounts Payable account (normally # 2050) and the Accounts Receivable account (normally # 1050) are “integration accounts” that System 5 posts to automatically when invoices and bills are created. The values in these accounts must remain, and must not be reversed in step 5 like all the other accounts. The suspense accounts 2990 and 2995 are used to post the offsetting amounts for A/P and A/R.

5. Create a new journal entry dated the first day of your new financial period (May 1, 2006 in our example). Using the printed trial balance as the basis of your entry, post the reversal of each account balance in the ledger entry. For example: if the bank account (1010) shows a debit balance of $1,600.00, enter a credit of $1,600.00 to make the balance zero.

Do not post to account 1050 and do not post to account 2050. Instead post a credit for the value of the total Accounts Receivable balance to suspense account 2995 (or whatever suspense account you have chosen). For Accounts Payable post a debit for the value of the total Accounts Payable balance to suspense account 2990 (or whatever suspense account you have chosen).

6. Enter into Supervisor Override mode (as shown below) while in this journal entry to reverse the value of Retained Earnings. Retained Earnings is an integration account as well, and cannot normally be posted to, but the Supervisor Override mode will allow this.

7. Click [Post] to complete the journal entry. 8. Print a trial balance for the first month of the new fiscal period. You will see only balances in the A/R, A/P, and corresponding suspense accounts.

9. Create a new journal entry dated the first day of your new financial period. Reverse both suspense account postings and enter all the correct balances of all other G/L accounts (except for Accounts Receivable 1050 and Accounts Payable 2050).

10. When it is a balanced entry and total debits equal total credits the [Post] button becomes enabled similar to the example shown below. Click [Post] to complete the posting of the journal entry. The ledger balances are now correct.

11. Go to Setup Wizard > General Accounting > Financial Years and adjust your current financial year to end with the month and year that is your actual financial year end i.e. 12/2006.