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How to use Income statement closing journals functionality?

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We have a requirement of generating Income statement closing journals. We have enabled the same at ledger options and after that generated the journals using the ESS 'Create Income Statement Closing Journals'.

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I have below questions regarding this functionality -

  • Do we need to reverse these journals? The category used in these journals by default is marked for auto reversal.
  • As we have enabled the closing journals at ledger options, will the system stop transferring balances to retained earnings at balance level?

While testing this functionality, I have observed that even though closing journal option is enabled, and I have generated (not posted) the Income statement closing journal, upon opening the next period (new year) balances from PnL accounts still got transferred to Retained Earnings account.

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