Quickbooks has become the preferred accounting software for business owners everywhere. Whether you operate a small-, medium- or large-sized business, you can’t go wrong with Quickbooks. It’s user-friendly interface, combined with constant updates and unparalleled customer support, simplifies the otherwise complicated and time-consuming task of recording your business’s financial transactions. However, it’s important that you familiarize yourself with “closing books” when using Quickbooks.
As most professional accountants know, “closing books” refers to the process of locking a particular time period so that new entries can no longer be added and existing entries can no longer be modified. When a new year rolls around, for example, you may want to close your books on the previous year. Assuming you’ve received payment for all outstanding invoices, you can close this year to ensure that neither you nor anyone else changes the entries.
The good news is that Quickbooks Desktop — the desktop version of Intuit’s popular business accounting software — makes automatic adjustments at the end of the year so that you don’t have to manually close your books. Known as year-end adjustments, they are created automatically using the start month of your fiscal year. So, how does it work? Basically, Quickbooks will automatically adjust your reported income and expense accounts so that they cancel each year, thereby allowing you to start the new year with a zero net income.
For December 31st of the previous year, Quickbooks will make closing entries to transfer the balance of your income and expense accounts to your retained earnings. Ideally, this should result in a zero net income while transferring your actual fiscal year’s net income to retained earnings.
But what if you want to review all changes that Quickbooks has made to your books? Thankfully, you can by following just a few simple steps. To see all changes made to your financial transactions, either on or before the closing date, log in to your Quickbooks account and click Reports > Accountant & Taxes > Closing Data Exception Report. Under “Closing date history,” you’ll see a list of all closing dates and the respective user who set them.
As a business owner, it’s important that you close your books at the end of a fiscal period. Neglecting to do so could result in accidental changes being made to your financial records, which can throw off your records come tax time.
Have anything else that you’d like to add? Let us know in the comments section below!