Understanding Month End Journals

Understanding Month End Journals

Automatic Month End Journals

When the month end process is run over an accounts module, a number of GL Journal entries are automatically created.
 
For each Account Type that belongs to a module, the month end process will:
  1. Add the current ledger balance of every account associated with that module
  2. Compare that total to the GL Code defined on the account type against the label GL Balance Sheet - Current
  3. Force a GL Journal to make the GL Code balance the same as the total calculated
  4. The other side of this journal will post to the GL Code defined on the module Control Details with the label GL Balance Sheet - Contra Account
Secondly
  1. Add the future ledger balance of every account associated with that module
  2. Compare that total to the GL Code defined on the account type against the label GL Balance Sheet - Future
  3. Force a GL Journal to make the GL Code balance the same as the the total calculated
  4. The other side of this journal will post to the GL Code defined on the module Control Details with the label GL Balance Sheet - Contra Account
Lastly
  1. Add all transactions that have posted to this module during the month
  2. Summarise all postings by transaction type
  3. Post the total of transactions associated with each transaction type to the GL Code defined on that transaction type
  4. The other side of this journal will post to the GL Code defined on the module Control Details with the label GL Balance Sheet - Contra Account
GL Integration Accounts for month end journals detailed on the Account Type setup:

 

The Rule

The first and second above processes will create a GL Journal that represents the movement in the account balances during the month for each ledger for a module.

The third process totals all transactions that have posted during the month for a module.

Identifying Month End Journals

On the basis that the movement in account balances must be the same as the transactions posted to a module to create those movements, then the balance in the Contra Account must come to $0.00.

If you print a GL Journal for the first two journals and then try to print the transactions associated with those journals from the Accounts | Print Transactions menu item, no transactions will be found.  This is correct as the GL Journal represents a movement in balances, and has no underlying transactions.

You may however print a list of all transactions posting to a module from the Accounts | Print Transactions menu item, by using the GL Journal number as the report selection criteria.  The report order would be transaction type to see the total of transactions posting to each GL Code included in the month end journal.

The next Newsletter will provide more detail on finding and printing month end journals.

The easiest way to find month end journals is to:
  1. General Ledger menu
  2. Access GL Codes
  3. [Search] for the required GL Code Contra Account and [Edit]
  4. Click on the [History] button and scroll down to the month end you are looking for

  1. The Amount column will be blank unless there is a balance that needs investigation
  2. From this display, click on the [Details] button to see the system generated month end GL Journals:

  1. The journal that has a date in the Reference column is the month end transactional journal.  The others will be the account balance journals (no supporting transactions).
A month end account balance journal will look like:

 

 A month end transaction journal will look like:

 

 Finding the transactions that make up the above month end journal number 1982.
  1.  Accounts | Print Account Transactions Report

  

Where the red arrow points is where the GL Journal number will be entered, 1982 in this case.

Make sure "Print Totals" is checked on so totals are printed at the change of each transaction type.  Those totals will be the same as the mount posted to the GL Code associated with the transaction type for that month end.

Troubleshooting Month End GL Code Contra Account Balances 

What to do if there is a balance in the GL Contra Account for a module:
  1. The first check is to identify whether a GL Journal has been entered against a GL Code that has been used by either of the first two journals described in the earlier Newsletter (the month end account balance journal).  
    1. As these month end journals force the GL Code to have the same balance as the total of the accounts for a ledger, the end result will be a balance in the GL Contra for the amount of the GL Journal
    2. Remember that GL Journals may be entered back in time so the journal you will be looking for may not be in last month’s GL transactions
    3. GL Codes that are associated with Accounts Types should be set up with a GL Code Posting Control of "Control".  This will stop GL journals being incorrectly posted to these GL Codes.
  2. The second check is to see if a transaction type has been set up to post to the GL Code Contra account specified on the module Control Details.
    1. It is usual for instalment postings to be set up to use this GL Code, as the instalment amounts posted from the future ledger to the current ledger should always be the same value.
    2. The current and future ledger instalment posting totals may differ if a user has changed the Input Method on a transaction type, and then used that transaction type to post or reverse an entry.  If that has happened, we recommend you call Argos for advice on how to correct.  Before contacting us, make sure you have a good understanding of why this action was undertaken.  What was the user trying to achieve?  That will give us a good lead into the corrective action that needs to be taken.
    3. It would be extremely rare for any other transaction type to post to the module GL Code Contra account.
    4. If a transaction type has been incorrectly set up in this way, change the GL Code on the transaction type to the correct one and then enter a GL Journal from the Contra GL Code to the correct GL Code.

Don't Panic

After month end, if you find there is a balance in a GL Contra Account, don't panic.  

Ensure that users continue normal processing before trying to ascertain why a balance has appeared.  Usually a GL Journal will be required to fix the balance, and that can be back dated into the previous GL month.

Worst case scenario is that transactions have been incorrectly posted on an account.  Correcting GL Journals may be raised and these should be flagged as Auto Reverse.

The account may then be corrected and the GL Code Contra balance cleared at the next month end.

Post Accounts to GL

At any time during the month the Post Accounts to GL process may be run to provide an up to date GL Trial Balance position.
 
This can be extremely useful in testing that alterations made to an account flow through correctly to the GL.  So, in the above example, where transactions have to be added to correct an account as a result of a balance in a GL Code Contra, running this process will update the General Ledger and show a zero balance.  If that is not the result, the correcting entries may have been entered incorrectly.
 

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