Managing the financial period
Software: MoneyWorks #accounting software
The year is broken into periods. You normally have 12 periods in your financial year, each one corresponding to a calendar month. However MoneyWorks lets you have anywhere from two to fifteen periods.
— MoneyWorks version 7 User Guide page 10, Period.
A Financial Year normally has 12 financial periods and each period corresponds to a calendar month. During the setting up of the company file, you may consider having an additional period, the period 13, for audit adjustment. Unlike the Calendar Year, the Financial Year may not start from January as it depends on the financial policy of the company and the country’s regulation, which your business has set up.
Assuming John has registered his business in April 2016, he will close his account by March 2017 if he wants to have 12 financial periods in his first year of business and yearly he will close his book as at 31 March. Now, if John prefers to close his account by December every year, then his financial year should start from January and ends in December.
MoneyWorks automatically open a new period for you if the administrator has given you the access right to “open new period”. However, to Lock, Close, and Purge period has to be done manually as the software is not able to determine when the account has completed.
After you have completed the month-end or year-end account, you can temporarily lock the financial period to prevent unauthorised changes to the account by activating the “lock” period feature in the MoneyWorks accounting software.
The period, which is locked, has to unlock first before passing an audit adjustment. After the audit adjustment, you can use the “Close” financial period feature in MoneyWorks to permanently lock the account. Although MoneyWorks allows you to keep up to 90 financial periods open, most user will close the financial period after audit adjustment to prevent accidentally posted transaction into the past financial year.
The “Purge” feature in MoneyWorks allows the user to purge the transactions in the closed financial period. Although the transaction has purged, the account balance will be kept. After purging, use the “Save a Compacted Copy” feature to reduce the file size. Purging is optional. Unless you have a huge file of more than 3.5GB, if not, you can keep the historical transaction forever (Note: You should BACKUP before purging).
Reference: MoneyWorks v7 User Guide page 197, Period.