At the end of the financial year, we recommend that you consult with your accounting firm. The following description is a simplified guide and the accounts we use are purely indicative.
Net Income: profit or loss?
Net income is the profit or loss that remains in a financial year after the company's expenses have been deducted from the company's revenues.
In the Balance Sheet, Net Income is calculated as Assets minus Equity and Liabilities, and in the Profit and Loss, Net Income is calculated as Revenues minus Expenses. If Net Income is positive (revenues > expenses) the company has made a Profit and if Net Income is negative (revenues < expenses) the company has made a loss.
How do I post the Net Income at the end of a financial year?
Once you have completed the financial statements and all transactions have been registered as journals, Net Income should be recorded as the last journal of the year. A balance is created between Assets and Equity & Liabilities in the Balance sheet, as well as in the Profit and Loss. Net Income is posted in order to zero-out your income and expense accounts at years-end (the Profit and Loss is to be zeroed) and the result will be posted on the balance sheet.
If Net Income is positive post it on debit: 9999 "Net result of the year" and credit: 2371 "Profit".
If Net Income is negative, post it on credit: 9999 "Net result of the year" and debit: 2375 "Net loss".
Example: A company after having completed its annual accounts estimates its net income after tax to 10 000 EUR (profit).
Example: A company after having completed its annual accounts estimates its net income after tax to -20 000 EUR (loss).
(The account numbers are from the Finnish Chart of Accounts).
Which accounts you use depends on how your chart of accounts is built up. If you cannot find the account you are looking for, or the one your accounting firm recommends, please choose to view All Accounts under Registry - Chart of Accounts - Chart of Accounts.
Note: Unlike companies as in the example, associations can as a suggestion use the following accounts: 9999 Surplus/deficit for the Financial year and 2030 Surplus/deficit for the Financial year
The account you are looking for may be inactive and you can activate it by simply select Active.
If you still cannot find the account you are looking for, you can add it by clicking on Add New Account.
Here you can fill in the information about your account:
The Account Classes you connect your accounts to may be:
- Net result of the year (Profit and Loss)
- Profit (loss) for the financial year in Capital and reserves (Balance Sheet)
Once you have created the new financial year and all the financial statements have been made, you can transfer the opening balances to the new financial year.
http://www.finlex.fi/sv/laki/ajantasa/1997/19971336 (the accounting law in Swedish)
http://www.finlex.fi/fi/laki/ajantasa/1997/19971336 (the accounting law in Finnish)