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Is there a way to close a prior year so that no further changes can be made to it?

Iris85Iris85 Member Posts: 6

Is there a way to close a prior year (at year end) so that no further changes can be made to it?

As I create invoices this current year and apply payments received in the year prior (2017) to them, the total revenue for 2017 is decreasing and accounts receivable is increasing. I understand why this is happening, but I am concerned because now I can't go back to Dec 31 2017 and see an accurate picture of our books at the year end. If our accountant asks me to go back for a detail report, or if we were to get audited, so much has changed now from what was submitted for taxes.

in Accounting Technical Support

Comments

  • AlexiaAlexia Member Posts: 3,314 ✭✭✭✭

    Hi, @Iris85.

    Wave never really closes out years. Other accounting platforms don't allow you to touch historical data, but in Wave, you can pull up reports and make adjustments at any time. This means that your previous years never really "close". All that happens at year-end is that current year earnings get zeroed and added to previous year earnings.

    At the start of your new fiscal year, you will see your new previous year earnings balance, fresh income and expense account balances, and your usual bank account balances.

    With that said, I can't give advice on how to deal with taxes, so my recommendation here is to talk to your accountant. They'll be able to walk you through the best way to handle this situation. Different tax administrations have different ways to handle the switch between cash and accrual accounting, and your accountant will be able to guide you through that.

  • KimptonKimpton Member Posts: 78 ✭✭

    Iris, your specific example refers to 'prepaids' or 'deposits'. As Alexia says you cannot close the previous year, but you can code transactions in such a way to eliminate this specific problem.
    First create a new account in the Liability section under Current Liability/Current Debt called either Prepaids or Deposits. There are 2 default accounts there for these already; Prepaid Income and Deposits Received. Either or, you choose. These are Balance Sheet accounts and do not show up on your Income Statement.

    When you receive cash today for a sale that will transact in a future period code it thus:
    Debit Bank
    Credit Prepaids or Deposits

    When the sale becomes final, code thus:
    Debit Prepaids or Deposits
    Credit Revenue

    You can contact me at kimptonb@telus.net for further help.

    edited April 22, 2018
  • Iris85Iris85 Member Posts: 6

    Thanks @Kimpton I have been utilizing deposits received and then recognizing the amounts as services are provided. I actually was doing this incorrectly for awhile - I was getting duplicate revenue because I was allocating the deposits received and then recognizing them as revenue through journal entries, but then when I would make a invoice for the recognizing the sale for the customer and HST it would duplicate the revenue. I've figured out how to do it now directly in 'transactions' so that I don't get these duplicate entries.

  • Iris85Iris85 Member Posts: 6

    @Kimpton On another somewhat related note: for the fiscal year 2017 I accidentally overstated deposits received by $400. I don't want to go back into 2017 and change the entries there because we have already submitted our statements for taxes. Do you know what I could do to 'write off' this amount in 2018/correct it?

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