Period Closing Voucher
A Period Closing Voucher is a specific tool that you use at the end of a financial period, such the end of the month, quarter, or year, to finish off your accounts before the following period starts. It's like saying, "Let's clean up the books before we start over."
1. What It Really Does?
This voucher takes the total amount of money you made or lost over the term and puts it in a "Retained Earnings" or "Accumulated Losses" account. This is your closing account, which you use to carry over balances.
All of your sales, service income, rent, salaries, electricity bills, and other income and expenses are set to zero. Why? These accounts are only good for a short time and need to be restarted in the following period.
You would normally have to post journal entries for dozens of accounts by hand. One coupon in ERPNext does this automatically, which saves time and cuts down on mistakes.
1.1. When should you use it?
After doing the following things, you should use the Period Closing Voucher:
1. Filling out all the financial information for the time period: This indicates that you have written down all of your income, expenses, and other transactions for that time period. There should be nothing missing.
2. Making the appropriate changes, such as closing inventories, bad debts, and depreciation: Adjustments, such writing off debts that can't be paid back or accounting for wear and tear on assets, assist show the underlying financial situation.
3. Completing any audits that are still open: If an internal or external audit is needed, it must be done before closing to make sure that all records are correct and follow the rules.
4. It's time to close your books: Once everything has been looked over and finished, you can close the books so that the new period can start over without messing up the records from the last one.
For instance:
Let's suppose for the year 2025:
The total income was £100,000.
The total costs were £70,000.
Profit after taxes = £30,000
When you use the Period Closing Voucher:
The £30,000 profit goes into Retained Earnings.
All accounts for income and expenses are set to £0.
Your Profit & Loss report is blank for the new year, so you can start over.
To access period closing voucher, go to:
2. How to create a Period Closing Voucher:
Go to the list and select New.
Choose the date of the transaction for which you are making the Period Closing Voucher. This should happen following the end of your fiscal year, when you're ready to shut the books.
- For example: 12-06-2025.
Pick the business that this closing voucher is for. If you run more than one business, be sure you choose the right legal entity.
- For example: alpha (Demo).
Choose the year that you are closing. This makes sure that all entries from that year are included in the close.
- For example: 2023–24.
Pick the beginning date for the period that represents the start of your financial year. This tells you when the transactions for this time period started.
- For example: 06-04-2023.
Choose the end date for the period, which is the last day of your accounting period. This is the last day that all journal entries and changes should be made.
- For example: 05-04-2024.
Pick the closing account head where the system will put the net gain or loss. This is frequently an account for equity or debt.
- For example: AD for Stock Received but Not Billed.
Look at the GL Entry Processing Status to see if the system has begun or finished processing the journal entries.
- For example: In Progress.
Use the space below to include any notes or comments that explain what this closing voucher is for. It enables people who are reviewing or auditing to know what this entry is for.
- For example: Period Closing Voucher for 2024.
Click Save and Submit.
2.1 Key Fields Described:
1. Date of Transaction: This is the real date that you are making the Period Closing Voucher. It lets the system figure out when the voucher was made, no matter what fiscal year it corresponds to.
2. Date of Posting: This is the day that the closing entry will formally go into effect in the books. It decides when the general ledger will show the profit or loss.
3. End of the fiscal year: This is the exact financial year that the voucher is closed. It makes sure that all income and expense accounts for that time period are cleared and moved to the right place.
4. Cost Centre for Books Smart Profit/Loss: When this option is turned on, ERPNext figures out and closes the profit or loss for each cost centre independently. This is helpful for companies that keep track of performance at the department or project level since it gives them more specific financial information.
2.2 What Happens After You Post?
When you post a Period Closing Voucher:
All accounts for income and expenses are set to zero. ERPNext clears the balances of all your income and spending accounts. This sets them back to zero so that the new fiscal year may start fresh.
The system automatically sends your net profit or loss to the closing account (like Reserves and Surplus). ERPNext figures out how much more money you made than you spent and puts that amount to the closing account. This shows the money your business has made or lost on its balance sheet.
The transaction is recorded in the General Ledger (GL). The system makes a backend GL record that shows how the funds were moved from the income and spending accounts to the closing account. This makes sure that your books are always ready for an audit and can be traced.
If you book profit or loss by cost centre, ERPNext will book each cost centre separately. When the cost centre option is turned on, ERPNext keeps track of each cost centre independently instead of putting them all together into one profit/loss number. This lets you look at the financial performance of any department, project, or business unit on its own.
