Hello, I have set up Encumbrance accounting to generate an accrual when the Purchase Order is confirmed. This is working ok (Cr Balance sheet accrual account, Dr P&L Expense account).
I am also happy with the accounting when the related Supplier invoice is posted; posting definitions drive the reversal of the encumbrance accruals, and make the correct postings for i.e. Dr Expense account, Dr VAT, Cr Creditor control account.
The challenge I'm facing is during the Year-end processes where an Encumbrance accrual sitting in the prior year, with the PO not yet goods receipted. Using the 'Purchase order year-end process' (in GL > Period close) this appears to flip the prior year accrual into the new fiscal year (from P13 to P1) and restate the Accounting date of the PO to the first day of the new fiscal year, which makes sense. However, when I then run the full Year-end process for the legal entity, the P&L Expense side of the accrual in the prior year gets included into Retained profit. For example, if I have a £10k expense accrual in the prior year, this gets included in the Retained profits and effectively reduces profit by £10k, which seems wrong since the 'Purchase order year-end process' has already flipped the accrual into the new fiscal year to be matched to the invoice when it arrives (after Year-end close).
I'm generally happy with my set up of Posting definitions but because I can find no documentation on the best practice set up for Posting definitions in this scenario I have nothing to validate my set up against.
My set up for posting definitions:
PURCHASE ORDER:
Match criteria:
P&L account structure + Expense nominal code
Generated entries:
P&L account structure + Expense nominal code. Generated debit/credit = Same.
Balance account structure + Accrual nominal code. Generated debit/credit = Balancing
SUPPLIER INVOICE:
Match criteria:
Balance sheet account structure + VAT Payable nominal code
Balance sheet account structure + VAT Receivable nominal code
P&L account structure + Expense nominal code
Generated entries:
Balance Sheet account structure + Creditor control nominal code. Generated debit/credit = Balancing
YEAR-END CLOSE:
Match criteria:
P&L account structure + Expense nominal code
Generated entries:
P&L account structure + Expense nominal code. Generated debit/credit = Same.
Balance account structure + Accrual nominal cod. Generated debit/credit = Balancing
Any advice/wisdom/guidance/validation/tips or tricks would be hugely appreciated.
Regards, Steve
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