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About closing your books at year-end

You can choose whether to close your books at the end of the year or not. QuickBooks doesn't require you to do so.

Advantages to closing your books

  • Restricted access: You can set a password to restrict access to data from the prior accounting period, including the details of every transaction. Transactions can't be changed without your knowledge. To modify or delete a transaction in a closed period, a user must know the closing date password and have the appropriate permissions.

Advantages to NOT closing your books

  • Detail: You always have easy access to last year's data, including the details of every transaction.

  • Reporting: You can create comparative reports between this year and last year.

Year-end adjustments QuickBooks makes automatically

QuickBooks performs certain year-end adjustments, based on your fiscal year start month.

  • QuickBooks adjusts your income and expense accounts at year-end to zero them out. Therefore, you start your new fiscal year with a zero net income.

  • QuickBooks makes an adjusting entry to your net income. For example, if your profit for the year was $12,000, on the last day of your fiscal year the equity section of your Balance Sheet would show a line for net income of $12,000.

  • On the first day of the new fiscal year, QuickBooks increases your Retained Earnings equity account by the previous year's net income ($12,000 in this example) and decreases your net income by the same amount. This way, you start each new fiscal year with a net income of zero.

See also

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