# Opening Balances & Year-End Close

Complete guide to setting up your accounting system and closing financial periods

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## Opening Balances

Opening balances are the starting amounts in each account when you begin using CNPERP or start a new fiscal year.

##### When Do You Need Opening Balances?

- System Implementation: Migrating from a previous accounting system
- New Fiscal Year: Carrying forward balances from the previous year
- New Entity/Branch: Setting up initial capitalization
- Mid-Year Start: Starting to use the system mid-year with current balances

### Understanding Account Types

Different account types require different balance treatments:

##### ASSETS

Normal Balance: Debit (positive)

Examples:

- Cash & Bank Accounts
- Accounts Receivable
- Inventory
- Fixed Assets (Property, Equipment)
- Prepaid Expenses

Opening Balance Entry: Debit amount (positive number)

##### LIABILITIES

Normal Balance: Credit (negative)

Examples:

- Accounts Payable
- Loans Payable
- VAT Payable
- Accrued Expenses
- Customer Deposits

Opening Balance Entry: Credit amount (negative number or use credit column)

##### EQUITY

Normal Balance: Credit (negative)

Examples:

- Share Capital
- Retained Earnings
- Current Year Profit/Loss
- Owner's Equity

Opening Balance Entry: Credit amount (negative number)

##### REVENUE / EXPENSES

Normal Balance: Usually ZERO at year start

Why Zero?

- Revenue & Expenses are closed to Retained Earnings at year-end
- New fiscal year starts fresh at zero
- Only exception: Mid-year system implementation

Opening Balance Entry: Typically ZERO (unless mid-year start)

### The Golden Rule of Opening Balances

#### Assets = Liabilities + Equity

Total Debits MUST equal Total Credits

If your trial balance doesn't balance, your opening balances are incorrect!

### How to Enter Opening Balances

#### 1 Navigate to Accounting Module

Go to Accounting → Chart of Accounts

#### 2 Select Account

Click on the account you want to set an opening balance for

#### 3 Enter Opening Balance

Click "Set Opening Balance" button and enter:

- Year: The fiscal year (e.g., 2025)
- Amount: The opening balance amount (use positive for debits, negative for credits)

Example: Account: 1110 - Cash - Bank Account Year: 2025 Amount: 50,000.00 (Positive = Debit) Account: 2100 - Accounts Payable Year: 2025 Amount: -35,000.00 (Negative = Credit)

#### 4 Verify Trial Balance

After entering all opening balances, run a Trial Balance report to verify:

- ✅ Total Debits = Total Credits
- ✅ Assets = Liabilities + Equity
- ✅ All accounts with balances are included

### Opening Balance Trial Balance Example

Opening Balance Trial Balance As of: January 1, 2025 Account Code | Account Name | Debit | Credit ══════════════════════════════════════════════════════════════════════ ASSETS 1110 | Cash - Bank CheckingAccount| 50,000.00 | 1120 | Cash - Savings Account | 25,000.00 | 1200 | Accounts Receivable | 120,000.00 | 1300 | Inventory | 85,000.00 | 1400 | Fixed Assets - Equipment | 200,000.00 | | | | LIABILITIES | | | 2100 | Accounts Payable | | 85,000.00 2200 | Loans Payable | | 150,000.00 2300 | VAT Payable | | 12,000.00 | | | EQUITY | | | 3100 | Share Capital | | 100,000.00 3200 | Retained Earnings | | 133,000.00 ══════════════════════════════════════════════════════════════════════ TOTALS | 480,000.00 | 480,000.00 ══════════════════════════════════════════════════════════════════════ ✅ STATUS: BALANCED ✅ Assets (480,000) = Liabilities (247,000) + Equity (233,000)

##### Common Mistakes

- Wrong Sign: Entering liabilities as debits instead of credits
- Incomplete Entry: Forgetting to enter balances for some accounts
- Unbalanced Totals: Debits don't equal credits
- Wrong Year: Entering balances for the wrong fiscal year
- Duplicate Entry: Entering the same balance twice

### Alternative: Journal Entry Method

You can also enter opening balances using a journal entry:

Journal Entry: Opening Balances Date: January 1, 2025 Reference: OB-2025-001 Dr. Cash - Bank Account 50,000.00 Dr. Accounts Receivable 120,000.00 Dr. Inventory 85,000.00 Dr. Fixed Assets 200,000.00 Cr. Accounts Payable 85,000.00 Cr. Loans Payable 150,000.00 Cr. Retained Earnings 220,000.00 TOTAL 455,000.00 455,000.00

## Year-End Close Procedure

A comprehensive guide to closing your fiscal year and preparing for the next accounting period.

##### What is Year-End Close?

Year-end close is the process of finalizing all financial activities for the fiscal year, generating final statements, closing temporary accounts (revenue & expenses) to retained earnings, and preparing the system for the new fiscal year.

### Period Close Workflow

Period Open
→
Soft Close
→
Hard Close
→
Locked

##### Period Open

Normal operations
Transactions allowed

##### Soft Close

No new transactions
Finance Manager can reopen

##### Hard Close

Period finalized
Only CFO can reopen

##### Locked

Audit lock
NO changes allowed

### Period-End Checklist

Before closing any period, complete this checklist:

Reconcile all bank accounts - Ensure bank statement matches book balance
Review accounts receivable aging - Verify customer balances and create bad debt provision if needed
Review accounts payable aging - Verify supplier balances
Reconcile inventory - Physical count matches system records
Review fixed assets register - All assets accounted for, disposals recorded
Accrue expenses and revenues - Record expenses incurred but not yet paid, revenues earned but not yet invoiced
Review prepayments and deferrals - Expenses paid in advance, revenues received in advance
Calculate depreciation - Record monthly/annual depreciation expense
Reconcile VAT accounts - Verify output VAT vs input VAT, prepare VAT return
Review journal entries - Ensure all entries are posted and properly documented
Run trial balance - Verify debits equal credits
Generate financial statements - Income Statement, Balance Sheet, Cash Flow Statement

### Year-End Close Steps

#### 1 Close All Monthly Periods

Requirement: All 12 months (or all quarters) must be hard-closed before closing the year.

Navigate to: Accounting → Fiscal Periods → Periods

For each unclosed period:

1. Complete the period-end checklist
2. Soft close the period
3. Review financial statements
4. Hard close the period

System Enforcement: You cannot close a fiscal year if any periods remain open.

#### 2 Year-End Adjustments

Record special year-end adjusting entries:

- Annual Depreciation: Calculate and record full-year depreciation
- Deferred Tax: Calculate current and deferred tax liabilities
- Bonus Accruals: Accrue annual bonuses payable
- Leave Provisions: Calculate annual leave liability
- Goodwill Impairment: Test goodwill for impairment (if applicable)
- Inventory Provisions: Write down slow-moving or obsolete inventory
- Bad Debt Provisions: Review and adjust bad debt provisions

#### 3 Generate Year-End Financial Statements

Run and review complete financial statement package:

- ✅ Income Statement (Profit & Loss)
- ✅ Balance Sheet (Statement of Financial Position)
- ✅ Cash Flow Statement
- ✅ Statement of Changes in Equity
- ✅ Notes to Financial Statements

Location: Reports → Financial Statements → Year-End Package

#### 4 Close Revenue & Expense Accounts

Transfer all revenue and expense balances to Retained Earnings:

Journal Entry: Year-End Closing Entry Date: March 31, 2026 (Last day of fiscal year) Reference: YE-CLOSE-2026 Dr. Revenue Accounts (Total) BWP 2,500,000.00 Cr. Income Summary BWP 2,500,000.00 (Close all revenue accounts to zero) Dr. Income Summary BWP 1,850,000.00 Cr. Expense Accounts (Total) BWP 1,850,000.00 (Close all expense accounts to zero) Dr. Income Summary BWP 650,000.00 Cr. Retained Earnings BWP 650,000.00 (Transfer net profit to Retained Earnings) Result: • All revenue accounts = ZERO • All expense accounts = ZERO • Net Profit of BWP 650,000 added to Retained Earnings

#### 5 Close the Fiscal Year

Navigate to: Settings → Fiscal Years

Select your fiscal year and click "Close Fiscal Year"

What Happens:

- System generates and saves year-end financial statements
- Fiscal year status changes to "Closed"
- Year is deactivated (no longer current)
- Permanent audit record created

#### 6 Create New Fiscal Year

Navigate to: Settings → Fiscal Years → New Fiscal Year

Enter details:

- Year Name: FY 2026-2027
- Year Code: FY2027
- Start Date: April 1, 2026
- End Date: March 31, 2027
- Period Type: Monthly (automatically creates 12 periods)

#### 7 Activate New Fiscal Year

Click "Activate" on the new fiscal year

##### ✅ Your System is Now Ready!

Opening balances are automatically carried forward from the closing balances of the previous year. You can begin entering transactions for the new fiscal year immediately.

##### Important Notes

- Backup First: Always create a database backup before closing the fiscal year
- Review Carefully: Year-end close is permanent and difficult to reverse
- CFO Approval: Year-end close requires CFO authorization in the system
- External Audit: Complete external audit before final close (if applicable)
- Tax Compliance: Ensure all tax returns are filed and paid

## What Happens After Year-End Close

Understanding your balance sheet after closing the fiscal year

##### What Balances Carry Forward?

After year-end close, only Balance Sheet accounts carry forward to the new year. Income Statement accounts (Revenue & Expenses) are reset to ZERO.

### Balance Sheet Accounts (Permanent Accounts)

These accounts CARRY FORWARD their balances:

Account Type | Carries Forward? | Examples | Typical Opening Balance in New Year
--- | --- | --- | ---
ASSETS | ✅ YES | • Cash • Accounts Receivable • Inventory • Fixed Assets | Same as closing balance (e.g., Cash: BWP 75,000)
LIABILITIES | ✅ YES | • Accounts Payable • Loans Payable • VAT Payable • Accrued Expenses | Same as closing balance (e.g., Loans: BWP 150,000)
EQUITY | ✅ YES (with profit added) | • Share Capital • Retained Earnings • Reserves | Previous balance + Net Profit (e.g., RE: BWP 233,000 + BWP 650,000 profit = BWP 883,000)

### Income Statement Accounts (Temporary Accounts)

These accounts RESET TO ZERO:

Account Type | Carries Forward? | Examples | Opening Balance in New Year
--- | --- | --- | ---
REVENUE | ❌ NO - Resets to ZERO | • Sales Revenue • Service Income • Interest Income | BWP 0.00 (Fresh start for new year)
EXPENSES | ❌ NO - Resets to ZERO | • Salaries Expense • Rent Expense • Utilities • Cost of Goods Sold | BWP 0.00 (Fresh start for new year)

### Example: Before and After Year-End Close

##### BEFORE Close (March 31, 2026)

Trial Balance - March 31, 2026 ASSETS Cash BWP 75,000 Accounts Receivable BWP 95,000 Inventory BWP 110,000 Fixed Assets BWP 200,000 ----------- Total Assets BWP 480,000 LIABILITIES Accounts Payable BWP 60,000 Loans Payable BWP 150,000 VAT Payable BWP 8,000 ----------- Total Liabilities BWP 218,000 EQUITY Share Capital BWP 100,000 Retained Earnings BWP 233,000 ----------- Total Equity BWP 333,000 REVENUE (Year-to-Date) Sales Revenue BWP 2,500,000 EXPENSES (Year-to-Date) Cost of Sales BWP 1,500,000 Salaries BWP 250,000 Rent BWP 60,000 Other Expenses BWP 40,000 ----------- Total Expenses BWP 1,850,000 NET PROFIT BWP 650,000

##### AFTER Close (April 1, 2026)

Opening Balance - April 1, 2026 ASSETS Cash BWP 75,000 ✓ Accounts Receivable BWP 95,000 ✓ Inventory BWP 110,000 ✓ Fixed Assets BWP 200,000 ✓ ----------- Total Assets BWP 480,000 LIABILITIES Accounts Payable BWP 60,000 ✓ Loans Payable BWP 150,000 ✓ VAT Payable BWP 8,000 ✓ ----------- Total Liabilities BWP 218,000 EQUITY Share Capital BWP 100,000 ✓ Retained Earnings BWP 883,000 🔄 (233,000 + 650,000 profit) ----------- Total Equity BWP 983,000 REVENUE (New Year Starts Fresh) Sales Revenue BWP 0.00 🔄 EXPENSES (New Year Starts Fresh) Cost of Sales BWP 0.00 🔄 Salaries BWP 0.00 🔄 Rent BWP 0.00 🔄 Other Expenses BWP 0.00 🔄 ----------- Total Expenses BWP 0.00 NET PROFIT (YTD) BWP 0.00

##### Key Observations

- Balance Sheet accounts unchanged: All assets, liabilities remain exactly the same
- Retained Earnings increased: Added BWP 650,000 profit from previous year
- Revenue & Expenses reset: All income statement accounts start fresh at ZERO
- Total equity correct: Still balances (Assets = Liabilities + Equity)

### Monthly Balance Growth Example (New Fiscal Year)

Watch how your accounts grow throughout the new fiscal year:

Month | Opening Balance Retained Earnings | Monthly Net Profit | Cumulative YTD Profit | Note
--- | --- | --- | --- | ---
April 1, 2026 | BWP 883,000 | - | BWP 0 | New year opening
April 2026 | BWP 883,000 | BWP 45,000 | BWP 45,000 | First month profit
May 2026 | BWP 883,000 | BWP 52,000 | BWP 97,000 | Cumulative profit grows
June 2026 | BWP 883,000 | BWP 38,000 | BWP 135,000 | Q1 complete
... | ... | ... | ... | ...
March 31, 2027 | BWP 883,000 | BWP 55,000 | BWP 720,000 | Full year complete
Next Year Open (April 1, 2027) | BWP 1,603,000 | - | BWP 0 | RE + YTD Profit closed

##### Understanding Current Year Profit

During the year: Current year profit accumulates in revenue and expense accounts

At year-end close: Profit is transferred to Retained Earnings

New year start: Retained Earnings reflects ALL accumulated profits from company inception

Example: If your company has been operating for 5 years with average BWP 600,000 profit/year, your Retained Earnings would be approximately BWP 3,000,000 (assuming no dividends paid)

### Verification Checklist After Year-End Close

Balance Sheet still balances - Assets = Liabilities + Equity
Retained Earnings increased by net profit - Previous RE + Net Profit = New RE
All revenue accounts show ZERO - Fresh start for new year
All expense accounts show ZERO - Fresh start for new year
Asset balances unchanged - Same balances as last day of previous year
Liability balances unchanged - Same balances as last day of previous year
Current period shows first period of new year - System ready for transactions
Financial statements accessible - Prior year statements saved and viewable

##### ✅ Your System is Correctly Configured!

If all checks pass, your year-end close was successful and you can begin normal operations for the new fiscal year.

## Complete Examples

Real-world scenarios with step-by-step instructions

### Example 1: New Business Setup (Fresh Start)

##### Scenario

ABC Trading Ltd starts operations on April 1, 2026 with:

- BWP 200,000 cash invested by owners (share capital)
- BWP 150,000 bank loan
- BWP 50,000 equipment purchased

##### Step 1: Create Fiscal Year

Settings → Fiscal Years → New Fiscal Year Year Name: FY 2026-2027 Year Code: FY2026 Start Date: April 1, 2026 End Date: March 31, 2027 Period Type: Monthly (auto-creates 12 periods)

##### Step 2: Enter Opening Balances

Accounting → Chart of Accounts → Set Opening Balances 1110 - Cash : BWP 200,000 (Debit) 1400 - Equipment : BWP 50,000 (Debit) 2200 - Loan Payable: BWP -150,000 (Credit) 3000 - Share Capital: BWP -100,000 (Credit) Note: Equipment BWP 50,000 was purchased with loan proceeds Total Debits = BWP 250,000 Total Credits = BWP 250,000 ✅ BALANCED

##### Step 3: Verify Trial Balance

Reports → Trial Balance → April 1, 2026 Account | Debit | Credit ═══════════════════════════════════════════ 1110 - Cash | 200,000 | 1400 - Equipment | 50,000 | 2200 - Loan Payable | | 150,000 3000 - Share Capital| | 100,000 ─────────────────────────────────────────── TOTALS | 250,000 | 250,000 ═══════════════════════════════════════════ ✅ BALANCED - Ready for operations

### Example 2: Migrating from Another System

##### Scenario

XYZ Manufacturing migrates to CNPERP on January 1, 2026 with existing balances from QuickBooks:

Previous System Balances (December 31, 2025): ASSETS: Cash - Bank Checking BWP 85,000 Cash - Savings BWP 40,000 Accounts Receivable BWP 225,000 Inventory - Raw Materials BWP 95,000 Inventory - Finished Goods BWP 150,000 Fixed Assets - Land BWP 500,000 Fixed Assets - Building BWP 800,000 Fixed Assets - Machinery BWP 350,000 Accumulated Depreciation BWP -280,000 LIABILITIES: Accounts Payable BWP 180,000 VAT Payable BWP 22,000 Bank Loan - Mortgage BWP 450,000 Accrued Salaries BWP 35,000 EQUITY: Share Capital BWP 500,000 Retained Earnings BWP 778,000

##### Step 1: Export from Old System

Export trial balance from QuickBooks as of December 31, 2025

##### Step 2: Map Accounts

Create mapping between QuickBooks accounts and CNPERP chart of accounts

##### Step 3: Enter Opening Balances in CNPERP

Accounting → Chart of Accounts → Bulk Opening Balance Entry Date: January 1, 2026 Year: 2026 ASSETS (Debits): 1110 - Cash - Checking BWP 85,000 1120 - Cash - Savings BWP 40,000 1200 - Accounts Receivable BWP 225,000 1310 - Inventory - Raw Materials BWP 95,000 1320 - Inventory - Finished Goods BWP 150,000 1410 - Land BWP 500,000 1420 - Building BWP 800,000 1430 - Machinery BWP 350,000 1440 - Accumulated Depreciation BWP -280,000 LIABILITIES (Credits): 2100 - Accounts Payable BWP -180,000 2300 - VAT Payable BWP -22,000 2210 - Mortgage Loan BWP -450,000 2120 - Accrued Salaries BWP -35,000 EQUITY (Credits): 3100 - Share Capital BWP -500,000 3200 - Retained Earnings BWP -778,000 Total Debits: 1,965,000 Total Credits: 1,965,000 ✅ BALANCED

##### Step 4: Verify and Go Live

Run trial balance, compare to old system, and begin operations!

### Example 3: Complete Year-End Close

##### Scenario

ABC Trading completes its first full year (April 1, 2026 - March 31, 2027) with excellent results. Time to close the year!

##### Financial Results for Year:

Income Statement (April 1, 2026 - March 31, 2027) REVENUE: Sales Revenue BWP 3,200,000 EXPENSES: Cost of Goods Sold BWP 1,920,000 Salaries & Wages BWP 480,000 Rent BWP 120,000 Utilities BWP 45,000 Depreciation BWP 30,000 Marketing BWP 85,000 Other Expenses BWP 50,000 ───────────── Total Expenses BWP 2,730,000 ───────────── NET PROFIT BWP 470,000

##### Step 1: Close All 12 Monthly Periods

Ensure all months from April 2026 through March 2027 are hard-closed.

##### Step 2: Post Year-End Closing Entry

Journal Entry: Year-End Closing Date: March 31, 2027 Reference: YE-CLOSE-FY2027 Dr. Sales Revenue 3,200,000.00 Cr. Income Summary 3,200,000.00 Dr. Income Summary 2,730,000.00 Cr. Cost of Goods Sold 1,920,000.00 Cr. Salaries & Wages 480,000.00 Cr. Rent 120,000.00 Cr. Utilities 45,000.00 Cr. Depreciation 30,000.00 Cr. Marketing 85,000.00 Cr. Other Expenses 50,000.00 Dr. Income Summary 470,000.00 Cr. Retained Earnings 470,000.00 Result: • All P&L accounts now ZERO • Profit of BWP 470,000 added to Retained Earnings

##### Step 3: Close Fiscal Year

Settings → Fiscal Years → Select FY2026 → Close Fiscal Year

##### Step 4: Create FY2027

Settings → Fiscal Years → New Fiscal Year Year Name: FY 2027-2028 Year Code: FY2027 Start Date: April 1, 2027 End Date: March 31, 2028 Period Type: Monthly

##### Step 5: Verify Opening Balances for New Year

Opening Balance - April 1, 2027 ASSETS (from March 31, 2027 closing): Cash BWP 320,000 ✓ Accounts Receivable BWP 180,000 ✓ Inventory BWP 290,000 ✓ Fixed Assets BWP 850,000 ✓ Accum. Depreciation BWP -310,000 ✓ LIABILITIES: Accounts Payable BWP 145,000 ✓ Loans Payable BWP 420,000 ✓ VAT Payable BWP 18,000 ✓ EQU ITY: Share Capital BWP 200,000 ✓ Retained Earnings BWP 547,000 ✓ (Opening RE: 77,000 + Profit: 470,000) REVENUE & EXPENSES: All accounts BWP 0.00 ✅ Total Assets: 1,330,000 Total Liabilities + Equity: 1,330,000 ✅ BALANCED - Ready for new fiscal year!

##### Congratulations!

Your year-end close is complete and your system is ready for another successful year of operations!

### Quick Reference

##### Opening Balances

- Assets = Debit (positive)
- Liabilities = Credit (negative)
- Equity = Credit (negative)
- Must balance!

##### Period Close

- Soft Close → Finance Manager
- Hard Close → CFO
- Lock → Audit only
- Complete checklist first!

##### Year-End

- Close all 12 periods first
- Transfer P&L to RE
- Close fiscal year
- Create new year

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