Prior year adjustments occur when you record an entry to an income statement account with an accounting date in your prior fiscal year. When this happens, your Current Ledger and Year-to-Date Ledger reports are out of balance until those prior year adjustments are closed to retained earnings or reversed. This is a common occurrence for business as Accountant usually does not have your accounts reconciled and done by the end of your companies fiscal year end. The prior year adjustment process allows your company to move forward and process their data without waiting for those adjustments.

The system can currently only close up to one prior fiscal year. That means any entries made to two fiscal years back is not recommended. If possible, we would recommend making the entry to the first period of the prior fiscal year so as not to affect the balances for two fiscal years ago. If you do end up making an entry to two fiscal years ago, please contact Sage Customer support or you local Sage Consultant to get that addressed. 

If you have already made your prior year adjustments and are ready to close them out to retain earnings, you'll follow the steps from article 17502 in our support knowledgebase to update your current fiscal year balances. Here is a quick walk through of what you will do:

1. Verify your company has a current backup of your data files.
2. Have all operators exit Sage 300 Construction and Real Estate.
3. From the Tasks menu, select Close Fiscal Year, and then click Yes.
4. Select the appropriate prefix, and click OK. This step applies only if you use prefixes.
   Note: The period end dates and fiscal year dates displayed are for reference only. If you are not currently in the last period of your fiscal year or if you have prior year adjustments that need to be closed, then the Close Fiscal Year task only closes prior year adjustments and does not actually close your current fiscal year.
5. You should receive a message indicating that prior year adjustments will be closed. Click OK.
6. Note the amount in the Close Fiscal Year - Earnings Distribution window. This is the net amount of prior year adjustments posted to income statement accounts. Click Cancel if you do not want to close your prior year adjustments to retained earnings, otherwise proceed to the next step.
7. Click Accept, then Start and then direct the journal to a file or printer. 

Use these steps anytime you have to make adjustments to your prior fiscal year and your current balances will updated accordingly!