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Closing a Year Without Reopening It: Cost Posting, Frozen Periods, and the Change Log

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Closing a Year Without Reopening It: Cost Posting, Frozen Periods, and the Change Log

Northwind's fiscal year ends 31 December. The 2024 books were closed on 20 January. On 9 February the accountant ran Adjust Cost - Item Entries and inventory value moved by 14,200 in the closed year, so the controller had to reopen and re-close. Warehouse staff must keep posting January item journals for receipts while finance users are blocked from posting to December and earlier. The auditors want evidence of who changed a purchase order price and when. Automatic Cost Posting and Automatic Cost Adjustment are both switched off in Inventory Setup, and Adjust Cost is run manually at month-end. There are two locations, one with directed put-away and bin mandatory.

1. How do you block finance from posting to December while still letting warehouse staff post January item entries?

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Separate the two controls. General Ledger Setup Allow Posting From = 1 February blocks G/L postings for the company. User Setup posting dates act per user and can be widened for warehouse staff, but they do not reopen the G/L period - an item journal posts item ledger entries, and only the cost side touches the G/L.

The item side. Use Inventory Periods and mark December and earlier as Frozen. Frozen inventory periods block item ledger postings regardless of G/L dates, while January stays open for receipts.

The trap to call out. With Automatic Cost Posting off, value entries are not posted to the G/L when you post the item journal; they wait until someone runs Post Inventory Cost to G/L, and that run dates the G/L entries back to the original posting date. So January receipts are fine on the item side but will try to land in a closed G/L period later. Either switch Automatic Cost Posting on, or run Post Inventory Cost to G/L before closing the G/L - the cost side, not the item side, must be closed last.

2. What caused the 14,200 movement in a closed year, and what sequence prevents a repeat?

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Cause. Adjust Cost - Item Entries recalculates the cost of existing item entries and writes adjustment value entries. Run three weeks after the period was closed, with automatic cost adjustment off, the recalculation reached back into December and changed the inventory value of a closed year. Nothing in the system stopped it because the inventory period was not frozen and the G/L cost had not yet been posted.

Sequence that prevents it.

  1. Turn on Automatic Cost Adjustment so cost is adjusted as the triggering entry posts, and on Automatic Cost Posting so value entries hit the G/L immediately and the effect is visible before anyone signs off.
  2. Schedule Adjust Cost - Item Entries in the job queue after each posting window, and once more immediately before close.
  3. Run Post Inventory Cost to G/L as a close-checklist step, not afterwards.
  4. Only then freeze the December inventory period and set the G/L posting-from date.

Rule to state. Cost adjustments must complete before the inventory period is frozen, and the G/L period must remain open until cost has posted. Reversing that order is precisely what forced the reopen.

3. The auditors want field-level evidence of purchase price changes. What do you set up, and what limits must you disclose?

Read the worked answer

Setup. Enable the Change Log: in Change Log Setup, add Purchase Line (and Purchase Header if the price can be changed there), tick Log Insertion / Modification / Deletion, then activate the change log. Entries record user, date and time, and old and new values, and are read from Change Log Entries.

Limits you must disclose.

  • It logs only from activation forward. It cannot reconstruct last month's price changes, so the auditors' historical question is answered from posted documents and approval entries, not the change log.
  • It grows the database; log only the tables that matter.
  • The item card's unit price has no history at all - if list-price history matters, log the Item table or keep dated price lists.

Complementary evidence. Approval Entries show who approved the price and when; the posted purchase receipt or invoice shows the price that was finally committed. Present the three together, and say clearly which question each one answers - that is what makes the answer defensible rather than a promise the change log cannot keep.