Tally Accounting
Posted by Asok K Nadhani on

Moving to Next Financial Year Accounts

Moving to Next Financial Year

After the Accounts of Current Year is closed, you have to create Next Year New Accounts, with ledger account Opening Balances of new year, as per the Closing Balance of previous year (Balance Sheet of the previous year) of Real & Personal Accounts.

In real life situation, it takes about 3-6 months for finalisation of Books of Accounts after the close of Financial Year.. So, if Financial Year ends on 31st March, normally organisations finalise the Books (after Audit, where applicable), sometimes between July to September. During this period, transactions continue to be recorded for previous (OLD)  Financial Year, as well as for the current (NEW).

New financial Year Accounts may be created in 2 ways :,

  • Manually Creating a New Company for New Financial Year & Masters
  • Extending the Financial Year to continue for next Financial Year also. Subsequently splitting the Accounts into 2 Financial Accounts

Now we explain the first method of manual creation of new Financial Year accounts

Creating new Financial Year Accounts manually

Books of New Financial Year must be opened immediately on the next date of previous financial year. The Accounting entries for Previous year (normally adjustment entries) and transactions for new Financial Year has to be recorded in respective Financial year. So, 2 financial year accounts must be kept opened for transaction entry, till the accounts of previous year (OLD) are closed and the Closing Balances are entered as Opening Balance of the current (NEW)  Financial Year.

So, for the current year Accounts, the opening Balances cannot be entered till the previous year accounts are finalised.

New Financial Year Manual creation steps

Create a New Company for the New Year (in the same way you created the first company).

  • Create a new Company : Click F3:Cmp Info button and then select Create Company to create a new Company for the next Financial Year. At Financial Year From, enter the Start Date of new Financial year.
  • Create Account Masters : The Reserved Accounts Groups & Accounts Ledgers would be auto created by tally. Now create the Account Groups and Accounts Masters as usual, in the same way you created the masters for the first company.
  • Ledger Opening Balance Entry: If the previous year accounts are finalized, then you may simultaneously enter the Opening Balance of Balance Sheet (Real & Personal) Accounts. Otherwise just create the Ledger Accounts without Opening Balance (leave zero at Opening balance). Later on, when the previous year accounts are finalized, you may enter the Ledger Opening Balance at Opening Balance field, through Ledger Alter option

You may find entry of Ledger Opening Balance at Ledger Accounts, through Alter option under Multiple section (GoT>Accounts info>Ledger>Alter )

New Financial Year automatic creation Steps

After close of Financial Year, extend the Period to cover next Financial Year and Continue new financial year entries also in the same data base (i.e entries of Previous Financial Year as well as entries of  Current Financial Year are made in the same data base). When the pervious year accounts are closed, the combined data base is split into 2 parts. First part for previous Financial Year, and second part for current (New Financial Year). The closing balance of previous Financial Year (OLD) is auto carried as Opening Balance of current (NEW) Financial Year. So, no need to create New Financial  Year Company, no need to create Ledger Accounts with opening balance for New Financial Year. These are performed automatically by Tally.

Moving to Next Year New Accounts Steps Manually

  • In Tally, you do not have to create Journal Entries for Opening Balance (as you do in traditional way), but the Opening Balance is entered in Ledger  Account Masters.
  • When you create separate Tally Company for each Year, to distinguish the respective Company, add the FY at the end of Name. For example, for the Company ABC Academy, enter the Company name ABC Academy 12-13 (for FY 12-13),  ABC Academy 13-14 (for FY 13-14), to identify the Company Properly. So, add the identifier at Name. However, you may enter same Name (ABC Academy) at Mailing Name for all the Financial Years.

Moving to Next Year New Accounts Steps through Company Split

  • Normally, the Accounts are not complete on the day of close of Financial Year. In that case, extend the Financial Year for the next year and continue working in the same Company for both years. Later on, when he Accounts of previous Financial Year is complete, split the combined data into two parts, one for the Previous Year and another for the current Year. In such case, you do not have to enter Opening Balance for the current Year.
  • Instead of creating a new Company afresh, you may continue entry for the next year, in the same Company, extending the Financial year. So, you may keep accounts for more than one Financial Year, in one Company (but not recommended). However, it is possible to maintain accounts of several years in one company (like Personal Accounts) to keep all the things centralized at one place. But, it is not recommended.
  • On splitting, The closing balance of Previous Year are automatically transferred as Opening Balance of current year. After splitting, you can not make any entry or change for the previous year data. For example, assuming that the Financial Year closes on 31st March, at the end of FY 21-22, on 1st April 2022, you should extend the Financial Year period and continue voucher data entry for 22-23 (1st April 2022 onwards) also in the same Company. When the accounts of FY 21-22 is complete in all respects, split the Company data which contains data for entire FY 21-22 and some data for FY 22-23, for 1st April 2022 onwards, till date, into two parts. One part containing data for FY 21-22 upto 31st march 2022 (Previous Year), and another part containing data for FY 22-23, from 1st April 2022 onwards (current Year). In the current Year data (FY 22-23), you do not have to enter the Opening Balances. The Closing balances of Balance Sheet Accounts of FY 21-22 (previous Year), would be automatically carried forward as Opening Balance for FY 22-23 (Current Year).
  • The Closing Balances of Nominal Accounts (Profit & Loss Accounts) of pervious year (FY 22-23) would not be carried in the Opening Balances of current year (FY 22-23).  The Opening Balances of Nominal Accounts in FY 22-23 would be set to ZERO.

Back up of Previous Year Data

You must take a Back of the Accounts of Previous Year Company after splitting, and keep it separately in a safe place. If for any reason, the current year data is damaged, you can restore from the Backed up Data.

It is a good practice to keep the previous year data in different Computer, and remove from the computer where Current Year work is going on, for security and any accidental entry / modification in Previous Year Accounts