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April 14, 2013 / Pandeeswari Ramakrishnan

Improvements to Open/Close Period Control in Openbravo

Openbravo ERP, being a multitenant architecture application, a single client may have different organizations. The organization may be of various types like legal with accounting, legal without accounting or generic. For more details on organization types and their implications refer here.

Fiscal Calendar:

When the organization is of type ‘Legal with Accounting’, the Fiscal calendar needs to be configured in order to manage accounting. This can be managed using the “Fiscal Calendar” window. The purpose of this window is to create and maintain the calendar, years that are included in the calendar and the periods that are included for each of these years. For those wondering about the options “Close Year” and “Undo Close Year” which were part of the Fiscal Calendar earlier, these options are now moved to ‘End Year Close’ window as part of the improvements done in Open/Close periods which is described in brief at the end. These improvements are done to clearly segregate the calendar setup and maintaining open/close year transactions enabling better transaction history. These improvements are available from version 3.0 MP 22.

Open/Close Period Control:

The Open/Close Period Control window as the name suggests is used to Open or Close an entire period or open the period for certain document types. The main tab allows to control the Open and Close functionality at the entire period level while the sub tab Document Type allows to close or open a period at the document type level. The improvements made to this window from 3.0 MP22 are as follows:

1. Earlier, to close or open a period, we have to create a new row. But now all the periods of the fiscal calendars created will be prefilled. All we have to do is select and open/close the period.

2. Pictures does speak a thousand words. Now you can visualize the status of the period even without searching for the status field and then decoding it with the status values. The status values are marked in colour code to enable quick view of periods.

A period can be in any of the following status, “All never opened”,”All opened”, “All closed”, “Mixed”, “All permanently closed”. These are the colour codes and description for each of these status.

  • All Never Opened, colored in gray. Recently created Periods.
  • All Opened, colored in green. All the Document Types are open for this Period.
  • All Closed, colored in red. All the Document Types are closed for this Period.
  • Mixed, colored in orange. Not all the Document Types have the same Status value in this Period. For more information refer to the Documents Tab below.
  • All Permanently Closed, colored in red. All the Document Types are Permanently Closed for this Period.

As you can see it provides a clear picture of the period’s status even without getting into its details. Similar operations are available at the document level.

800px-OpenClosePeriodControlPic2

For example scenarios and more detailed explanation about the Period Control, refer to our wiki here.

End Year Close:

The ‘Close Year/ Unclose Year’ which was part of the Fiscal Calendar has been refactored as a new window End Year Close. You can select any of the available Fiscal Calendars and Close or Undo Close the Fiscal Calendar. The close year process is used to close a Fiscal Calendar. This process closes all the periods of the fiscal year permanently. The standard periods need not be closed prior to running this process, however it can help to keep tracking of the periods of the year already reviewed and closed. The close year process requires that the next year exists and the first period of the next year to be open. Once a year is closed, it can be reviewed in the Open/ Close Period Control window. All the periods that are closed through this process will be marked with the status ‘Permanently Closed’. It will be not be possible to create any transactions within that year anymore. To create any transaction the ‘Undo Close Year’ process should be run.

The close year process in general creates the following accounting entries:

1. The “Profit and Loss Closing” entry.

  • This accounting entry resets all “Revenue” and “Expense” Account Types and the difference is posted in the Income Summary account.
    • In other words the “Expense” accounts are “Credited and the “Revenue” accounts are “Debited” and the difference if any is posted in the Income Summary account.
    • Let’s take an expense account with a debit balance of 500,00. The P&L Closing entry creates a credit accounting entry of 500,00 in the Expense account of the example, therefore it gets a balance equal to zero.
    • If the revenue accounts total balance is higher than the expense accounts total balance that difference is credited in the Income Summary account, that means a positive result or a profit.
    • If the revenue accounts total balance is lower than the expense accounts total balance that difference is debited in the Income Summary account, that means a negative result or a loss.
  • This accounting entry is posted the last day of the last period of the year being closed, that is the “Adjustment Period” or “13th Period” of the year.
  • Openbravo does not create a G/L Journal for this accounting entry but just the accounting entry.

2. The “Closing” entry or “Balance Sheet Closing” entry.

  • This accounting entry credits all the accounts which have a debit balance and debits all the accounts which have a credit balance. The aim of this accounting entry is to get that Asset and Liability accounts get a zero balance.
    • In order words, let’s take an Asset account with a debit balance of 8.000,00. The closing entry creates a credit accounting entry of 8.000,00 in the Asset account of the example.
  • This account entry is posted the last day of the last period of the year being closed, that is the “Adjustment Period” or “13th Period” of the year.
  • Openbravo does not create a G/L Journal for this accounting entry but just the accounting entry.
  • This entry is created only if the Reverse Permanent Account Balances check-box is set to yes.

Finally, if a Retained Earnings account is specified for the general ledger configuration, an additional entry dated on the last day of the year is created.

This entry moves the Income Summary account balance to the “Retained Earnings” account.

3. And the “Opening” or “Balance Sheet Opening” entry.

  • This accounting entry is the reversal entry of the closing entry.
    • Following the example of point 2 above the opening entry creates a debit accounting entry of 8.000,00 in the Asset account of the example. That amount is the opening balance of the asset account for the new year.
  • This accounting entry is posted the first day of the first period of the next year.
  • This entry is created only if the Reverse Permanent Account Balances check-box is set to yes.

For a use case scenario on how to use the ‘End Year Close’ process and its implications on the Accounting entries refer here.

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