Closing Books in QuickBooks

Gregory J. Cook, EA, CPA+ Accredited Tax Advisor Past President Alabama Society of Enrolled Agents Past President Alabama Association of Accountants

Closing My Books in QuickBooks
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.
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.


You close your books by setting a closing date. You can also limit access to the closed accounting period by setting a closing date password.

If you decide to set a password, QuickBooks requires the password for changes that would alter balances for the accounting period you have closed. This includes adding, editing, or deleting transactions dated on or before the closing date. You can change the password at any time.

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.