GL accounts were incorrectly setup with the wrong Account Type. Some Income Statement accounts were setup as Balance Sheet accounts so after running Create New Year, these accounts did not close to Retained Earnings. These accounts still have a beginning balance in the new year.
There are two methods for correcting this problem.
- Ensure the option Allow Posting to Previous Years is selected. This is found in GL Setup / Options on the Posting tab.
- Create a new GL account with the correct Account Type - Income Statement.
- Create a GL journal entry to transfer the balance from the old Balance Sheet account into the new Income Statement account.
- Enter a posting date of the last day of the prior year to make sure the entry goes into period 12 of the previous year
- The system will recognize the entry is posted to a prior year and will update the Retained Earnings account and zero out the Income Statement account for that year
- You can now mark the old Balance Sheet account as Inactive so no additional entries can be posted to this incorrect account.
- You can use the GL Account Code Change utility to combine the old balance sheet account into the new income statement account. This will bring all the old transactions into the new account and remove the old account.
Change the Account Type from Balance Sheet to Income Statement on the affected account and do a manual journal entry in the GL to transfer the balance from the account into retained earnings. Use the CLS period for this transaction.