Treatment of retained earnings in case of retroactive cutoff at the beginning of the fiscal year
If this is the timing of the beginning of the fiscal year, the operation of the sales purchasing and inventory system can be started by quickly completing the following processes, which are called cutoffs, which are the processes that take over historical data when the system is reset and restarted.
- Complete all unshipped (incoming) sales purchase data and reset inventory impact factors.
- All inventory data is taken out and reset.
- The inventory balance at the end of the previous year was put into storage.
At worst, the accounting process can be done in time for the end of the month.
- Completed all pending accounts payable data and reset the accounting impact factor.
- Reset the balance of trial balance (Trial Balance = T/B) by offsetting journal entries on the transfer slips.
- Input the balance sheet (B/S) items at the end of the previous year's T/B by transfer slips.
At this time, I set the order balance data as needed, but it's cumbersome, so I prefer to enter sales and purchases (or accounts payable) at the same time as incoming and outgoing shipments (or settlements), and concentrate on improving the accuracy of inventory and accounting data for the time being. In this case, the Sales list and the AR Aging list will be available in the next month or so.
Even if the cut-off timing is during the period, the system automatically transfers the accumulated profit to retained earnings at the end of the year by entering the balance sheet (B/S) items at the end of the previous month on the transfer slip and entering the transactions from the current month.
This is because Retained earning, the net asset item at the end of the previous month, contains the cumulative profit from year-to-date (from the beginning of the month to today), so the income statement (P/L) item only manages the accumulation from this month's accrual to the end of the year. For example, I don't know the cumulative amount of transportation costs for the entire year.
If you want to know the accumulated P/L amount for the whole year, you need to enter the accumulated P/L amount for the year-to-date in addition to the B/S balance at the end of the previous month, but in this case, you need to subtract the accumulated profit for the year-to-date included in the Retained earning.
- Enter (not balance) the cumulative total of P/L subjects from the beginning of the year to the previous month on the transfer slip.
- Enter the T/B's B/S subjects at the end of the previous month on the transfer slip, but subtract the cumulative profit from the retained earning.
In addition, if you need P/L and B/S By month for year, you need to input the T/B balance at the end of the month with a transfer slip and do the closing process, and you need to repeat this with year-to-date, but usually you don't do this far.
Corporate Accounting and Balance of Payments
Business accounting and balance of payments are the same in principle as double bookkeeping, but the difference is that they are presented in reverse of balance of payments, so they are distinguished by the term "double accounting".
Just like a cash flow statement, this is an image of getting the relative subject amount of the journal entries based on the cash flow code from the G/L and displaying the balance in reverse.
In business accounting, P/L is considered in terms of profit and loss (movement of assets), while cash flow statement is considered in terms of income and expenditure (movement of money). For example, the following is a journal entry when sales (earnings) are paid in full in cash.
- Dr. Cash 100 Cr. Sales 100
This is because P/L and B/S are written on an asset basis and normal balance is written on the right for assets and left for income. The journal entries representing the movement of cash are reflected in the cash flow statement.
Under the direct method, cash and cash equivalents are offset to the IN and OUT portions of operating, investing and financial activities based on a G/L (or journal book table, which is usually the same) cash flow code.
On the other hand, the indirect method is used to prepare the operating activity part to show how much of the profit and loss on P/L has been achieved, and the offset of liabilities, equity and assets for investment and financial activities is basic cash and deposits, so it is the same as the direct method cash flow statement.
The balance of payments journalization is the same way as corporate accounting, and is prepared in the same way as calculating the cash flow statement from the perspective of the G/L cash and deposits account.
- Dr. Cash（Increase in financial assets） Cr. Export（income）Write a credit and a debit in reverse.
- Cr. Export（income） Dr. Cash（Increase in financial assets）
- Dr. Import（expenditure） Cr. Cash（decrease in financial assets）Write a credit and a debit in reverse.
- Cr. Cash（decrease in financial assets） Dr.Import（expenditure）
Since the financial balance plus always occurs relative to the trade and services balance (current account balance) plus, and the financial balance is almost the same amount as the balance of payments, the following equation roughly holds. In other words, if the current account balance is in the black, the financial balance is in the red, but a financial balance deficit indicates that there are many overseas assets.
- Current account balance - Financial balance = 0
The current account (value added from trade and foreign investment) converges on the financial balance, just as net income (value added created in the current period) is incorporated into retained earnings.
As a central bank (BI) with a current account deficit and few foreign currency reserves, the exchange rate defense measures it can take are likely to be foreign capital inflows at a remarkably high interest rate (the central bank rate is 7.5% as of May 2015), but the government wants to lower interest rates to stimulate the domestic economy.
By now, we have become accustomed to the Rp13,000 per dollar, but the rupiah's psychological line of defense continues to recede, from Rp.9,000 to Rp.10,000 to Rp.12,000.
The main reason for this is the current account deficit, or to be more precise, the inability to generate added value to satisfy domestic demand domestically, but if exports are mainly primary products (natural rubber and palm oil), the added value is small and is influenced by the economic demand of the destination country because it is a market commodity.
Since domestic demand is the engine of growth, I think the royal road to economic growth for developing countries is to satisfy domestic demand by creating added value domestically and reduce imports to prevent financial asset outflows.
The role that the Japanese manufacturing industry can play in improving the current account balance and stimulating domestic investment is very large, and I think it can contribute enough to boost the GDP of Indonesia.
If Indonesia's domestic economy improves, as it is now, it can't be helped that import pressure will intensify and the current account balance will become negative, but unless we improve the pattern where the volume of the domestic financial market is thin and interest rates are high, the demand for private sector borrowing is weak and the country is dependent on foreign capital, I think that only public investment from the government will increase and capital will become unevenly distributed.
It is a mystery that some regulations will come out that will prevent foreign capital from flowing in, but it is interesting to see whether the corporate tax reduction from 25% to 18%, which has been a hot topic recently, will really be implemented.