Closing is the part of FI where sequence matters most. The individual steps are not difficult, but running them in the wrong order produces financial statements that do not hold up. The aim here is the shape of the whole process.
Month-end and year-end
Year-end closing is month-end closing plus the extra work needed to carry the books into the next fiscal year.
| Type | Purpose | Additional steps |
|---|---|---|
| Month-end | Finalise the period result and balances | โ |
| Year-end | Finalise the annual statements and roll into the next year | Balance carry-forward, transfer to retained earnings, year-end tax adjustments |
A typical month-end sequence
Details vary by company, but the shape is generally as follows. Each step depends on the one before it, which is why the order is not arbitrary.
| Step | Activity | Code | Purpose |
|---|---|---|---|
| 1 | Stop operational postings | โ | Includes closing MM and SD periods |
| 2 | Analyse the GR/IR balance | F.19 | Reclassify goods invoiced not received and vice versa |
| 3 | Accruals and deferrals | FBS1 / F.81 | Reversing entries to correct period attribution |
| 4 | Foreign currency valuation | FAGL_FCV | Revalue open items at closing rates |
| 5 | Depreciation run | AFAB | Post the period charge |
| 6 | CO allocations and settlements | โ | Reflect controlling-side processing |
| 7 | Close the period | OB52 | Close the current month, open the next |
| 8 | Produce the statements | S_ALR_87012284 | Trial balance, balance sheet and P&L |
Period control (OB52)
Closing the posting period is what actually ends the month. OB52 controls which account types may be posted, for which periods, by which authorisation groups.
Two period intervals are normally used together: the first for ordinary users, the second for the closing team, so that only finance can still post to the prior month while the close is running.
Analysing GR/IR
The GR/IR account introduced in the overview has to be analysed at every close. A balance means one side of the receipt-and-invoice pair is missing.
- Goods received, no invoice (debit balance): the goods arrived but the invoice has not. Reclassify as a liability for goods received not invoiced.
- Invoice received, no goods (credit balance): the invoice arrived but the goods have not. Reclassify as an asset for goods invoiced not received.
The reclassification is posted with F.19 and normally reversed at the start of the following month. Items sitting in GR/IR for a long time often indicate purchase orders that were never closed, or duplicate postings, and deserve review at every close.
Financial statement versions
Producing statements requires a financial statement version, which defines how accounts are grouped and subtotalled โ what counts as a current asset, at which level subtotals appear โ as a hierarchy.
A company code can have several. Running one version for local statutory format, one for IFRS and one for internal management reporting side by side is common.
Year-end carry-forward
At year end, balances are carried into the next fiscal year. Balance sheet accounts carry their balance forward as the opening balance; P&L accounts reset to zero, with the result transferred to retained earnings.
| Scope | Code | What it does |
|---|---|---|
| General ledger | FAGLGVTR | Carry forward balance sheet accounts and transfer P&L to retained earnings |
| Vendors and customers | F.07 | Carry forward sub-ledger balances |
| Fixed assets | AJRW | Change the asset fiscal year |