If you are using General Index of Financial Information (GIFI) codes for Canadian financial statements and more than one fiscal year is open, you must create clearing accounts to simulate the closing of the prior fiscal year to calculate accurate balance sheet amounts for the current date on financial statements. For example, if the current date is March 21, 2007, and you have not closed the 2006 fiscal year, following this procedure simulates closing the prior fiscal year:

  1. Create a clearing account. For this example, title the account Prior Year Earnings.The account number should not be in the range of accounts that is included on financial statements and should not have a GIFI code associated with it.

Note Note

The clearing accounts are temporary and are used only to temporarily transfer amounts to for this process.

  1. Create a second clearing account. Title the account Prior Year Additions to Retained Earnings. The account number should not be in the range of accounts that is included on financial statements, but it must have a Retained Earnings GIFI code associated with it.

  2. Post the prior year earnings.

    • Debit the Prior Year Earningsclearing account. Make sure that the balance sheet does not include the Prior Year Earningsclearing account.

    • Credit the Prior Year Additions to Retained Earningsaccount. Make sure that the balance sheet includes the Prior Year Additions to Retained Earningsclearing account in the Retained Earnings section.

  3. Print the financial statements.

  4. When you close the books, credit the Prior Year Earningsclearing account and debit the Prior Year Additions to Retained Earningsaccount.