You can choose whether to close your books at the end of the year ornot. 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.
Reporting: Any changes made after the closing date to transactions dated on or before the closing date will appear in the closing date exception report.
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 yearstart month.
QuickBooks adjusts your income and expense accounts at year-end to zero themout. Therefore, you start your new fiscal year with a zero net income.
QuickBooks makes an adjusting entry to your net income. For example, if yourprofit for the year was $12,000, on the last day of your fiscal year the equitysection 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 RetainedEarnings equity account by the previous year's net income ($12,000 in thisexample) and decreases your net income by the same amount. This way, you starteach new fiscal year with a net income of zero.
See also