Update Financial Year and Retained Earnings

Update Financial Year

The Financial Year dictates the transactions that are included in the Retained Earnings Recalculation. Moving from 2025 to 2026 will post the 2025 P&L Balances to Retained Earnings

The Closed Period must be at least period 12 of the current financial year (the year we’re closing out)

When do I need to update the financial year?

The financial year should only be updated once all the end of financial year transactions have been posted. This will usually be after your external accountant has finalised their reporting and filed the tax return.

There is an app that runs directly from the menu that updates the financial year. This does not allow the financial year to be rolled back. If you need the financial year rolled back, you will need to contact [e-mail]

Here is an example of a scenario where the financial year can’t be rolled. In this case, the closed period is in the current financial year. We need ALL the period in the current financial year closed

You are blocked from updating financial year if your closed period isn’t in the current financial year

At this point, you need to update the Closed Period using the Update Current Period app

If you are quite far behind with your closed period, contact [e-mail] and we can bulk update those for you

Once you have confirmed that all of the current year information has been posted, you can roll

Retained Earnings and GL Accounts

Retained Earnings is the sum of the Profit and Loss GL Account totals for the financial years prior to the current financial year. A business in its first year will not have any retained earnings. In the second year, the retained earnings balance will be the first year profit or loss. In the third year, retained earnings will be Year 1 profit/loss + Year 2 profit/loss etc.

There is a flag on the GL Account maintenance app for End of Year Clear. This flag indicates the GL Account is a Profit and Loss type account

There also needs to be a Retained Earnings GL Account. This is a Balance Sheet type. Balance Sheet type accounts carry their balance forever

Retained Earnings Transactions

When the Financial Year is updated, the system will generate transactions to the Retained Earnings GL Account. These have a transaction type of EOY Journal

Reopening a Financial Year

It is possible to reopen a financial year but you will need to contact [e-mail] to do this. We roll the financial year back, then recalculate retained earnings for that period. If you have already aligned your general ledger balances with those of your end of year accountants, we recommend you get in touch with them prior to opening a previously closed year. It’s important to keep the balances consistent between both systems, as your external accountant relies on the values in Profitz. Please use an abundance of caution before getting a closed financial year reopened

How do we know everything is correct?

We must validate the values in the GL reports. This also validates the setup of your P&L and Balance Sheet reports. The Profit calculated in the P&L Report must match the current year profit in the Balance Sheet. From there, the YTD Retained Earnings must be the LYTD Profit + LYTD Retained Earnings

It’s important to note that the Profit from the P&L isn’t calculated the same way as the Current Year Profit in the Balance Sheet

P&L Profit is determined by the calculations in your underlying GL Report (jdm/gl/m_GLRP)

Current Year Profit in the Balance Sheet is the sum of all the GL Accounts flagged End of Year Clear

This should be validated when the GL Reports are setup but this is a good opportunity to ensure things are still calculating correctly

If Retained Earnings hasn’t been calculated there will be two problems with the Balance Sheet

1. Net Assets won’t equal Total Equity (it should always balance)
2. LYTD Profit hasn’t been added to Retained Earnings (this is the cause of Net Assets to Total Equity variance)
   • We carry a small variance here due to prior period rounding issues

Net Assets = Total Assets less Total Liabilities

Total Equity = Retained Earnings plus Equity Items

Please contact [e-mail] if you have an imbalance in any of your GL reports, especially the Trial Balance of the Balance Sheet.