We are just coming up to the end of our second year of using Solar but I have noticed that the financial year has not been reset since we started using the package.

Does it cause any accounting problems if we do it at this late stage or do we even need to do it at all?

What are the implications involved please?

Hi Stuart,

You actually don't need to use the 'financial year' feature in Solar Accounts - your Profit and Loss will not be affected. The Balance Sheet will show profit from previous years earnings as Current Earnings instead of Retained Earnings, but this doesn't really matter.

If you want to set the financial year wait until you have entered all your transactions for the financial year (ie. a few weeks into the new year) click menu Setup > Financial Year > Start a new financial year. This will create an end-of-year transaction that resets the balance of the income and expense accounts to zero.

Regards,

If I do use the 'financial year' feature, do I also need to record any general transactions to make sure that my closing stock at the end of year 1 becomes the opening stock at the beginning of year 2, or does Solar recognise this automatically?

In the previous accounts package I used it was necessary to credit the stock account and debit cost of sales account with opening stock values and, for closing stock, debit the stock account and credit the cost of sales account with closing stock values. This needed to be done at beginning and end of each year. I only make an annual inventory of stock at each year end.

It was also necessary to record a similar transaction to adjust the owner's capital account.

Hi Stuart,

Whether or not you use the 'financial year' feature, you will need to make adjustments to the stock level at the end of each year (Solar Accounts doesn't do this automatically).

We think a good way to do this is to record one General Transaction at the end of the period representing the change in stock value as described here:
http://www.solaraccounts.co.uk/help/how-to-track-changes-in-stock-level.php

However, an alternative is to use the approach you describe where you record an adjustment at the beginning and end of each period - you could do this with two General Transactions. (In a General Transaction, the From Account is credited and the To Account is debited)

Most users will leave the Owners Capital account unchanged from year to year. However, you will probably want to transfer the profit into the Retained Earnings account - using the 'financial year' feature will do this for you.

Regards,

Hi Stuart,

Yes, you can change the financial year settings at any time without affecting any other transactions. It will slightly change the Balance Sheet and some other reports, but not in a significant way (in my opinion).

Regards,