News Flash – How to Close Your Books with the QuickBooks Year-End Guide
We've been getting a lot of questions about how to close your books for 2010. Many don't realize that QuickBooks has a Year-End Guide in the Help menu. It shows you how to wrap up the business year, archive your QuickBooks files, and get ready for the new year.
Here's some additional information about closing your books, from in-product Help:
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.
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.
This article is provided for informational purposes and is not intended to be construed as legal, accounting, or other professional advice. For further information, please consult appropriate professional advice from your attorney and certified public accountant.