I am aware that Acumatica has a dedicated account for keeping track of the YTD Net Income balance and with every income or expense transaction, this account is updated. Furthermore, as documented in Acumatica’s Help material (see below), Acumatica automatically updates the Retained Earnings account for the next financial years that are defined.
The system updates this account for every transaction posted to an income or expense account. When the system updates the balance of the YTD Net Income account, it also updates the beginning balance of the Retained Earnings account in the next financial years for which the financial periods are defined. For a new financial year, the system resets the balance of YTD Net Income to zero for a new financial year.
However, for auditing purposes, when a user looks at the Account Summary and Trial Balances for the retained earnings account, the Ending Balance of the last period of one year would not match with the Beginning Balance of the first period of the following year. An example is below.
Period 13-2021. Ending Balance is -23,369,030.13
Period 01-2022. Beginning Balance is -30,330,849.47
This could cause some confusion for the users. Furthermore, no actual GL Journal seems to be present for the transfer of the amount to the Retained Earnings Account (as it appears that the amount is automatically moved). Hence, a user would not be able to track the difference.
For this reason, I would like to ask whether Acumatica has some DB Table (such as GLHistory) where a transaction is kept for this movement to the Retained Earnings account.
Thanks,
Nigel Pace
Best answer by Laura02
Hi Malinda,
I worked with Dynamics SL “Solomon”.
At any point in time, the Year to Date Net Income (also called “Current Earnings”) account displays the difference between Income and Expense accounts when the sign of the Trial balance is set to Normal in GL Preferences. We do not post to YTD Net Income -- is a system-updated account.
Auditors can confirm that the difference between Income and Expense accounts = YTD Net Income.
At year end, the ending balance in Retained Earnings + the ending balance in YTD Net Income = beginning balance for Retained Earnings for the next year.
When you reprint the prior year, all the detailed balances still display in the income and expense accounts. You can still see the correct end of year balances in YTD Net Income and previous year Retained Earnings.
If the auditor provides adjustments to prior year, these can be posted to December, can be posted (depending on # periods in your year) to a 13th period meant for audit adjustments alone, or can be posted to the first period of this year, identified as ‘prior year adjustments’. Your CPA will make recommendations for how you should post your audit adjustments.
In the case where you post to the closed year, 1) security options and roles in Acumatica control whether posting to closed period is allowed and 2) who can do it.
There is no need to re-open or reclose…. although Acumatica offers the options to re-open and re-close as well! In all of these options for posting to prior year, the audit adjustments correctly roll themselves forward.as updated beginning balances in the new year. Enjoy!
Wish I could help you , I am finding similar frustrations. I am used to being able to see all transactions (ever not year by year) in nominal accounts. There seems to be barriers to doing this in the native reports in Acumatica.
Good morning @NPace29, Acumatica is not alone in handling the year-end transitions in this manner; it’s not unique to Acumatica, to automatically close out income/expense to Retained earnings with no actual transactions. I expect the design is common in modern systems (though I have not tried all modern systems).
The design saves having to re-open/re-close years when a transaction is posted backward over a year-end close.
I worked with Microsoft Dynamics for 30 years and their product functioned the same way since at least 1990. In my experience, the design has not caused any issues with auditors, who accept that the YTD Net Earnings account + the previous year’s ending balance in Retained earnings = the beginning balance in this year’s retained earnings. So long as these figures balance, the auditors will be satisfied without seeing all the extra zero-ing out transactions physically present on reports.
I hope this helps you feel comfortable as you approach your audit.
Thanks for your information on this Laura. I have never worked ike this, I also worked with Microsoft Dynamics for many years from version 2 whe it was called Navision, probably one of the first adopters. However I was still on a very old version when I finished working on this system..things have moved on and I haven’t...So what is the answer for Nigel where his two figures don’t agree. I seem to spend a lot of time feeling a bit uncertain and lost on Acumatica at the moment. Not being able to really get my hands on the data. I hope to improve but it makes me feel quite unconfident.
Once you close off if you got audit journals to enter could you re-open or run another close?
At any point in time, the Year to Date Net Income (also called “Current Earnings”) account displays the difference between Income and Expense accounts when the sign of the Trial balance is set to Normal in GL Preferences. We do not post to YTD Net Income -- is a system-updated account.
Auditors can confirm that the difference between Income and Expense accounts = YTD Net Income.
At year end, the ending balance in Retained Earnings + the ending balance in YTD Net Income = beginning balance for Retained Earnings for the next year.
When you reprint the prior year, all the detailed balances still display in the income and expense accounts. You can still see the correct end of year balances in YTD Net Income and previous year Retained Earnings.
If the auditor provides adjustments to prior year, these can be posted to December, can be posted (depending on # periods in your year) to a 13th period meant for audit adjustments alone, or can be posted to the first period of this year, identified as ‘prior year adjustments’. Your CPA will make recommendations for how you should post your audit adjustments.
In the case where you post to the closed year, 1) security options and roles in Acumatica control whether posting to closed period is allowed and 2) who can do it.
There is no need to re-open or reclose…. although Acumatica offers the options to re-open and re-close as well! In all of these options for posting to prior year, the audit adjustments correctly roll themselves forward.as updated beginning balances in the new year. Enjoy!
I’ve just checked the implementation team set our preferences to ‘reversed’ so do you know how my current earnings account will appear with this preference set up.
With the sign set to Reversed, the YTD Net Income account doesn’t show on the Trial Balance report. Credits look like negatives and Debits look like positives, totaling to $0 at the bottom.
With the Sign of the trial balance set to Normal, Total assets = total Liabilities followed by Income and Expenses listed & subtotaled separately. Normal balances look positive and “abnormal” balances look negative.
For example, a credit balance in AP would look negative with the sign of the trial balance set to reversed, and a credit balance in AP would look positive with sign set to Normal.
Now it’s been set up like this should it stay like this? is it just a display change rather than actual data integrity?
I need to ask the reasoning for this set up from the implementation team as there may be a good reason why it has been set up like this. I joined this company when the implementation was 99% complete so I have not been involved in any discussions on format if there were any, But this maybe explains my difficulties in working with the TB.
Yes, that is a switch that can be changed temporarily and changed back, if you want to check it out. Do you have a test tenant? If so, I recommend testing in the Test tenant.
Thanks @laura01 and @Malinda278 for your comments and explanations - much appreciated!
I agree that for auditing purposes, the Retained earnings ending balance for the following year would tally to the Retained Earnings of prior year + Net Income (Total Income - Total Expenses) and I have confirmed this so it works out. However, from the standpoint of clarity and visibility to users who are not aware of the underlying logic, it might be confusing (as the original screenshots show) at first when looking at the reports available.
I had also done some tests and identified that the retained earnings balance for a year is updated automatically based on the postings made in the previous year/s so if a user posts an income or expense transaction in a previous financial year, the beginning balance for the next year is automatically updated to ensure that the logic balances out correctly.
@Malinda278, if your group decides to change the format, there is no adverse affect. It is not possible to change the setting for just one person, so you’ll want to discuss the change with your accounting staff.
What if the retained earnings at the beginning of the year are not equal to the ending retained earnings in the previous year?This case occurs because the current year earnings in the last month are not included in the beginning retained earnings for the following year.what's the solution?What if the retained earnings at the beginning of the year are not equal to the ending retained earnings in the previous year?This case occurs because the current year earnings in the last month are not included in the beginning retained earnings for the following year.what's the solution?
The retaining earnings at the beginning of year wont be equal to the ending balance of previous year, since the previous current earnings get added to retaining earnings on closing last period of pervious Financial year.
You may refer to following documentation in this regard:
The retaining earnings at the beginning of year wont be equal to the ending balance of previous year, since the previous current earnings get added to retaining earnings on closing last period of pervious Financial year.
You may refer to following documentation in this regard:
But the problem that occurs here is that the beginning retained earnings has a different value. my case example: end balance retained earnings 2016= 3,000 current year jan2016- Nov2016= 1.300 current year Dec2016= -300 beginning balance retained earnings jan 2017= 4,300 the value should be= 3,000+1,300+(-300)=4,000 So the current year value Dec2016 is not included in the Beginning balance Retained Earning Jan2017 automatically. What problem is causing it and how to solve it? Thanks
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