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Closing books as part of year end procedures

QuickBooks is one of the few accounting programs that does not require you to close your books. The program makes some automatic adjustments at the end of the fiscal year to prepare your books for the new year. If you choose not to close your books, you can protect the prior year transaction from accidental change by using a transaction password.

Advantages of not closing your books:

You have easy access to the prior year data, including the details of every transaction.
You can create comparative reports between this year and last year. 

Detailed information

Closing Entries

Closing Entries are entries made at the end of your Fiscal Year (FY) to transfer balances from income and expense accounts into Retained Earnings (RE), zeroing out the income and expense accounts and adding the Net Income (NI) for the FY to your RE. You make the Closing Entries after you have entered all of your operating and adjusting entries. When you have made the Closing Entries, your books are "closed," i.e., you may make no more entries for the FY. Some accounting programs prevent you from making any entries to a closed period. No matter that any entry corrects an error and makes the books more accurate, you can not do it.

Now, let's suppose you are using an accounting program in which you have to enter a Journal Entry to clear income and expense accounts to Retained Earnings. Then let's suppose that you find a bill for November that you have not entered. If the program allows you to enter it, then you have to redo the Closing Entry. And if you find another entry, you have to redo the Closing Entry again. If you have filed your Income taxes for the company then you would have to submit corrected tax forms. This is one of the reasons that some accounting programs lock you out of closed periods. (There is program in which you have to close each month, and once a month is closed you can not go back to make entries in that month. It is also limited how many months you could have open to 10 periods or months open at any time, so you could not have an entire FY open.)

QuickBooks does not have the Closing Entries in the sense that you can pull up the Journal Entries on the screen and see the credits to expenses and debits to income and credit to the Retained Earnings. When you run a report that needs to show these entries, e.g., a QuickReport on Retained Earnings, Quickbooks calculates them and displays them in the report. But you can not "QuickZoom" on them to bring them to the screen. The type will show as "Closing Entry" which is not a real transaction type in QuickBooks. 

KB ID# INF13306
10/20/2016 2:24:35 PM
PPRDQSSWS407 9138 Pro 2017 28767b