Chapter 10, Before Moving On - Sage 50

Question 1

Why is it necessary to enter reversing entries for accruals after closing the year?

Answer 1

-because the accrued revenues and expenses recorded in the previous fiscal year could be recorded again in the new fiscal year when income is received or costs are paid. Reversing entries ensure that the portion of the cost or income that relates to the previous fiscal year is not recorded twice.

Question 2

What steps are involved in closing the current year in a manual system?

How is this done in Sage 50 Accounting?

Answer 2

a) Process journal entries to transfer Revenue and Expense accounts to Retained Earnings or Capital accounts.
b) Process journal entries to close Dividends Declared or Drawings.

In Sage 50 Accounting, the session date is advanced to the first day of the new fiscal year and the Revenue and Expense accounts are closed to Retained Earnings or the Capital account.

Question 3

What are two reasons you would back up the data files before doing the year-end closing in Sage 50 Accounting?

Answer 3

• Data errors may occur during year-end closing procedures.
• Payroll errors may occur and a backup device will allow you to make changes and print T4 slips again.
• Year-end audit adjustments can be made on the backup copy to print revised financial statements.