Reading your surplus when there is no year-end close
How a non-profit reads its accumulated surplus when no closing entry is posted, locks the year after adjustments and explains the layout to its board.
By Achekam · · 5 min read · For Non-profit businesses in South Africa, Nigeria, Kenya
At the first board meeting after year end, the treasurer puts the balance sheet on the screen and a trustee asks a fair question: "Last year's signed statements showed one figure for accumulated surplus. Why does this show two lines, and why does neither match?" The treasurer knows the organisation is fine. Explaining why the layout looks different is harder.
The reason is simple once you see it. Achekam posts no year-end closing entry, so the year's surplus is not swept into accumulated surplus; it sits on the balance sheet as a line of its own. This article explains what that means, how to read the two lines together, how to lock the year once your accountant's adjustments are in, and what to tell the board.
What the missing closing entry means on the balance sheet
In many accounting systems, a closing entry at year end takes the year's surplus or deficit out of the income and expense accounts and adds it to accumulated surplus (in a company, retained earnings). Achekam does not post that entry. Profit is not closed to retained earnings and shows as its own line on the balance sheet.
Nothing is lost by this. The balance sheet still balances, and the organisation's total funds are exactly what they would be after a closing entry. They are simply shown in two parts instead of one:
| Line on the balance sheet | What it holds |
|---|---|
| Accumulated surplus (or retained earnings) | The surplus brought forward from earlier periods, such as the opening balance you started with |
| Profit for the period | Surplus or deficit from income and expenses posted in the books, not yet moved into accumulated surplus |
Add the two together and you have the figure a signed set of statements would show as accumulated surplus, before any adjustments your accountant makes for the final statements.
Reading the profit line beside the surplus brought forward
Achekam's management accounts show an income statement for a chosen period beside the period before, and a balance sheet at period end, both added up from the organisation's own journals and exportable as PDF or CSV. Read them together.
- Start with the income statement for the year. That is this year's surplus or deficit.
- Compare it with the profit line on the balance sheet. If your books cover only this year, the two should agree. If they cover several years and the profit line is larger or smaller than the year's result, the difference is earlier years' results that were never moved across, because no closing entry has been posted.
- Add the profit line to accumulated surplus. The total is your organisation's general funds as the books stand.
The year-to-date preset in the management accounts starts on 1 January, not on your own year start. If your financial year runs from April, July or March, set the dates yourself when you look at the year as a whole.
If your organisation tracks restricted funds separately in its chart, apply the same reading to each: the balances brought forward plus the year's movements.
Locking the last month of the year before the accountant's adjustments
Year end in a non-profit usually involves adjustments your accountant posts: accruals for late grant expenditure, deferred grant income, depreciation catch-ups, corrections found during review. Those need a month that is still open.
Months in Achekam can be soft-closed, hard-closed and locked. A closed month refuses postings from every source, and reopening a hard close needs a second approver. A practical sequence:
- Close each month of the year as you go, so day-to-day staff cannot post into them.
- Keep the final month open only until your accountant has posted the year-end adjustments.
- Once the adjustments are agreed, hard-close the final month and lock it.
From then on, the year's figures in Achekam match what the accountant used, and nothing can drift in afterwards.
Who posts year-end adjustments, and why a correction is a reversal
Your accounting firm can post those adjustments directly in your books once you have appointed it by its Achekam address or firm code, in a role such as accountant, auditor or adviser, with the access level you choose; the firm accepts or declines the appointment.
A business can post manual journals in Achekam, but an unbalanced journal, or one dated in a closed month, is refused, and a posted journal is corrected only by a reversal. That matters at year end. If an adjustment turns out to be wrong after the board has seen the draft, it is not quietly edited; it is reversed and replaced, and both entries remain visible. For a board and an auditor, that trail is reassuring rather than awkward.
What to tell the board when the layout differs from last year's signed statements
Your annual financial statements are prepared by your accountant under the reporting framework that applies to your organisation, and their layout follows that framework. The management accounts from your books are working figures, laid out the way the books hold them. Different layouts do not mean different totals.
In Kenya, for example, ICPAK has issued a technical advisory on the International Non-Profit Accounting Standard explaining why IFRS and IPSAS do not fully meet non-profits' reporting needs, which is one reason a non-profit's signed statements can look quite different from its internal reports.
A short note for the board pack helps:
- "The books do not post a closing entry, so this year's surplus appears as its own line."
- "Accumulated surplus plus that line equals our general funds before year-end adjustments."
- "The signed statements will show one accumulated surplus figure, after the accountant's adjustments."
Funders often ask for a cash flow statement too, which the books do not produce; when a funder asks for a cash flow statement explains the route. Bills that arrive after the year has closed are covered in a late bill and the month it reports in.
Before the next board meeting
Put the income statement for your own financial year beside the balance sheet, check that the profit line and the year's result tell the same story, and add a two-line explanation to the board pack. Then agree with your accountant when the final month will be locked.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
