Opening Balances - more info

As we work towards preparing to implement the first end of financial year roll over, it is very important the Opening Balances are correct.  Please take a moment to read through the following notes, and check your own data as per the instructions.  You may wish to ask your accountant’s advice, and both you and your accountant should feel free to contact us with any questions at all.

As you will remember, prior to conversion you entered some Opening Balances.  These represented your figures “so far” and were probably extracted from your previous Accounting System.  Depending on whether you had access to all the figures or not, you may have only entered balances into enough accounts to get you up and running, say Bank Balance, Accounts Receivable & Payable and Stock.

Your Opening Balances normally consist of the full set of accounts:  Profit & Loss and Balance Sheet and therefore they actually form a Trial Balance.  That means that the total of Debits should equal the total of Credits and there should not be an amount “left over”.  To facilitate dealerships converting to Accounting without waiting for a full set of figures, the software has an additional field within the Opening Accounts screen labeled Balance of Opening Entry to which the left over debits or credits would be applied.  This is technically not an opening profit entry, but really just a balancing (or suspense) entry enabling the conversion to take place prior to entering the full set of Opening Balances.  If the conversion was done with a full set of accounts, then this field should display as zero.

Additionally the Opening Balance screen  contains a listing within the Proprietorship account labeled P-40000 Profit Earned This Year that although a valid account in your set of accounts, should not be used for data entry. The Profit for the current year is actually calculated within the software as required and is never actually posted to an account.  It is simply the difference between the data entered in the Sales & Expense accounts less the other Proprietorship accounts.

What this means for you

If your Opening Balances have been entered correctly and in full, there will be a zero amount displayed in the Balance of Opening Entry field.   If either this field has an amount entered, you should check your opening entries before rolling over the financial year.  Once the financial year is rolled, Dealerlogic will use the entered figures, and they cannot be later changed.  These proprietorship accounts will continue to affect your Balance Sheet.

What should you do

Open your Opening Accounts screen.  It is located from the Accounting menu, select Setup, then Opening Balances, and finally Accounts.

Note the amount displayed in the Opening Profit Entry field at the bottom of this screen.

If it is zero, then:

1.Your Opening Accounts have been entered correctly and in full.  You are ready to roll the financial year, OR

2.None of your Opening Accounts have been entered.  You will be entering these prior to rolling the financial year.

If it is not zero, then:

1.Only selected Opening Balances were originally entered to permit the dealership to convert to accounting quickly.  The remainder of your Opening Balances will be entered prior to rolling the financial year, and it is assumed that when they are entered this figure will reduce to zero, OR

2.The full set of Opening Balances was entered, but there is still an amount sitting in this field.  In this event, the opening balances should be checked carefully.  Were the balances entered from a Trial Balance?  Additionally, check the Proprietorship account P-40000 “Profit Earned This Year”.  This account should not contain a value.  If it does, it should be removed.

What are the consequences?

Dealerlogic will prevent the financial year roll from occurring while there is a value in the P-40000 “Profit Earned This Year” account.  This account will revert to read-only once it has been reduced to zero.  This means you can only change it’s opening balance to zero, and then it can’t be changed again.

If you choose to do the year end roll while there is a value in the P-20000 Opening Profit Entry field, this amount will be rolled into a Proprietorship Suspense account.  It could be journaled from there if necessary later on.

A correctly set up Opening Chart of Accounts will see this year’s profit rolled into the cumulative account “Retained Earnings”.

Additionally the field within the Opening Account Balances screen presently labelled “Opening Profit Entry” will be re-labelled to read “Balance of Opening Entry” as any amount in this field does not necessarily represent profit and is simply the balancing entry.  The account represented by this field, P-20000, will also be renamed within the Chart of Accounts to “Balance of Opening Equity”.

You will notice additional fields displaying in the Preference screen, which is available to you from the Accounting, Setup menu.  These indicate the first financial year and whether it is closed or open, and the current financial year.