Closing the Books
Question:
How do you close the books on a monthly/yearly basis?
Answer:
Quickbooks does not “close” the books in the classic accounting sense. The closing date/set password feature in Edit > Preferences > Accounting is simply a safeguard to not allow postings to periods that have had financial statements printed or even more importantly tax returns completed. For this reason, to the clients I work with, I suggest setting the closing date to the end of the most recent fiscal year. A previous post asked what happens when you post vendor invoices from a previous month. Assuming you are reporting on the accrual basis the date of the invoice will reflect the month in which the expense is recorded. If you have set the closing date to the end of that month you will receive a warning and have to enter the password. If you know invoices are still due from vendors from the prior month then you probably have not issued financial statements and there is no need to set a closing date yet.
When users setup their companies originally they have to indicate their fiscal year. Quickbooks then knows what reporting period constitutes a year and is smart enough to know at what date net income is transferred to retained earnings. Whenever a report is requested you always have to put a date range. Quickbooks knows how to show income and expenses based on the dates entered.
This is why there is no “closing” procedure in Quickbooks.
Tags: Closing, End of Year, Retained Earnings
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