Year end closing in Microsoft Dynamics NAV involves three steps:
Closing the fiscal year using the Accounting Periods option.
Generating a year-end closing entry using the Close Income Statement option.
Posting the year-end closing entry along with the offsetting equity account entries.
You are not required to close a year, but doing so will make working in the system easier for you because you will be able to take advantage of the convenient filtering options provided. You also don't have to worry about losing details of transactions when you close because all details are retained, even after you close the year.
When you close at the end of the year, the system moves your earnings from calculated earnings to the Retained Earnings account. The system also marks the fiscal year as "closed," and marks all subsequent entries for the closed year as "prior year entries."
The system then generates a closing entry, but it does not post the entry automatically. You are given the opportunity to make the offsetting equity account entry or entries, which allows you to decide how to allocate your closing entry. For example, if your company has several divisions, you can let the system generate a single closing entry for all the divisions, and you can then make an offsetting entry for each division's equity account.
You can post in a previous fiscal year, even after the income statement accounts have been closed, if you run the Close Income Statement batch job again afterward.