One of the key benefits of accounting period control is the ability to close off each ledger once entering transactions for the period has been completed. This prevents users from changing information in a period where management reports have already been produced.

This means that a transaction can no longer be entered against a previous period which, in turn, means that any management reports produced will not change. The debtors, creditors and profit & loss and balance sheet have, in effect, been locked down.

So what happens if a purchase invoice is received and is dated in a prior month? Most good systems will allow the transaction to be entered with the date/tax point on the invoice (allowing for an accurate VAT return) and account for it in the new period. For example; if period 1 has been closed and an invoice is received dated 31st January this can be entered with the correct date i.e. 31st January and put into accounting period 2.

With some systems it possible for a supervisor to re-open a period should the need arise to add or change something, reproduce the reports and then close off again. Ledgers would normally be closed of in the following order:

  1. Sales ledger: easy to do normally at the beginning of a new month once all the invoices and receipts for the month have been entered.
  2. Purchase ledger: a little later on since you are likely to have to wait for some supplier invoices to arrive unless you accrue for them.
  3. Finally close-off Nominal/General ledger once journal adjustments for the period have been entered.

If your system allows for it, then this feature is a great control.