How To Close The Books For The End Of The Year In QuickBooks

[Mark]

What you should know about “Year End Closing” in QuickBooks
I am often asked about “closing” the books at year-end in QuickBooks. Many old-school and complex accounting programs require you to perform a closing process at the end of a financial year before entering any information for the current year. In fact, at the large corporation I used to work, we had to close the books every month! After the closing process is complete, the information is “locked down” and there is no changing it. Period. This creates deadlines, bottlenecks, and stress for all of us in accounting trying to get our work done. If you want to learn How To Close The Books For The End Of The Year In QuickBooks then you can give us a call at our Quickbooks Support Phone Number anytime you want.

Most small business owners, and many bookkeepers, are not native accountants and don’t understand the exact reason for the “closing” procedure, they just know it’s something that is done, and are concerned about getting it done.

Do you need to “close the books in QuickBooks”? The answer is yes, and no. Large businesses that provide periodic financial statements to shareholders and/or Board Members must ensure that the statements are accurate and will not be changed after presentation. They must close the books in finality at certain periods in order to present this information as complete.

For most small businesses, the cut off is related to filing their tax return. In other words, once you run the Profit and Loss and Balance Sheet and use that information to file your taxes, you do not want to make any further changes to that year’s data. That makes sense; after all, if you entered some additional Income or Expenses after the year is over, it wouldn’t be reported on your tax return ever.

QuickBooks doesn’t have a formal “closing” process, and this makes some people feel like it must not be a “real” accounting program. But QuickBooks is designed for Small Business users, and, although it can be dangerous, there are practical reasons why QuickBooks leaves prior year data open for editing:

1. It’s not practical to expect every small business to complete all of their year-end work before creating any other transactions in the current year

2. Often there are credit card expenses coming in on statements clear through February.

3. Many businesses depend on our CPA or tax preparer to provide us with adjustments like depreciation expenses that need to be entered once the tax return is prepared.

4. A lot of small businesses depend on a bookkeeper – who may have multiple clients – to reconcile their books.

So, rather than imposing a locked down closing, QuickBooks creates a Journal Entry automatically at the end of the year to transfer the Net Income to Retained Earnings and allows you to set a closing date password. The closing date password feature allows anyone with the password to change prior year’s data, and helps keep you from accidentally entering anything into the wrong year.

Setting a closing date password in QuickBooks does not prevent anyone from entering transactions in the “closed” period, but it does give you a warning and require you to enter the password in order to post any transactions. I usually set a closing date password after I have completed my year end “closing” procedures. See my article Quickbooks at Year End Closing Checklist.