Odoo CE Accounting - Fiscal Year Closing

What is Fiscal Year?

Fiscal Year is referring to a 12 months period of the accounting year. In Malaysia, fiscal year may not always be from 1st Jan to 31st Dec, and most companies may opt to have a different fiscal year.

At the end of fiscal year, the company has to submit the financial documents for Accounting Auditing and Tax Audit.

What is the purpose of Fiscal Year Closing?

Fiscal Year closing is the journal entries posted at the end of the financial period to reset the temporary account to Zero. The balances are brought forward to the permanent account called Retained Earning.

Temporary accounts are Revenue, Expenses and Dividends.

Permanent Accounts are Assets, Liabilities and Equities.

There will be 2 Chart of Accounts:

1) 999999 Undistributed Profit/Loss (Account type is Current Year Earning) - A temporary account for Net Profit/Loss of the current year, which is typically coming from the Profit&Loss.

2) Retained Earning (Account type is Equity) - Permanent account for retained earning, which will be brought forward to the next financial year.

Therefore, in a typical accounting system, accounting user would like to do a Fiscal Year Closing, with a opening entry.

a) Move the Net Profit/Loss from previous fiscal year to the new fiscal year "Retained Earning" Account. See the screenshot below for the double entry in the journal entry.

b) Bring forward Asset, Liability and Equity account balances. This does not required any action as the Balance sheet is pre-configured to be always from the first day of the system go live (Fiscal year of system Go Live).

c) Lock the previous fiscal year data

Odoo Official Suggested Checklist of Transactions to be completed, as follow:

1. Invoice, Vendor bill and Expenses must be recorded and validated.

2. Reconciled all the Bank statements in the period.

3. Transfer of Suspense Account to the actual Account.

4. Posted the Depreciation, Loan and Tax adjustment.

5. Make sure all the Deferred revenue are posted.

6. Make sure all the Accrued Revenue and Expenses are posted.

How to do Fiscal Year Closing in Odoo CE?

The steps are as follow:

1. Close the fiscal year.

2. Update the fiscal year and period to all the invoices and vendor bills.

3. Create a new Opening balances journal entries and DR the Undistributed Profit/Loss (999999) from previous fiscal year and CR the new fiscal year retained earning account.

4. Lock the transactions and no more update or changes to the closed year's transaction.

CR to Retained Earning if company is profitable for that year, or DR if loss.

Upon the accounting records being audited by the Auditor, which could be about 3 to 9 months after the end of the fiscal year, all the audited financial records shall be locked and cannot be amended anymore.