Closing The Year In QuickBooks

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Closing your accounting year is a necessary function even for QuickBooks users. Although not forced like many accounting programs, QuickBooks allows you to secure your accounting data and preserve your records. This methodology can be used more frequently, but is necessary at least once per year to retain reliable accounting data.

Published in: Business, Economy & Finance

Closing The Year In QuickBooks

  1. 1. Closing the Year in QuickBooks ® Making Journal Entries and Setting the Closing Date
  2. 2. Closing the Year <ul><li>Historical financial data should be preserved for: </li></ul><ul><ul><li>Audit </li></ul></ul><ul><ul><li>Analysis </li></ul></ul><ul><ul><li>Accounting Fee Savings </li></ul></ul>
  3. 3. Closing the Year <ul><li>The most accurate final numbers are available from your accountant or tax preparer. </li></ul><ul><li>Do not rely on your QuickBooks data. </li></ul><ul><li>Source reports for the data by preference: </li></ul><ul><ul><li>Trial Balance (Best) </li></ul></ul><ul><ul><li>Financial Statements (Good) </li></ul></ul><ul><ul><li>Your tax return (Fair) </li></ul></ul>
  4. 4. Closing the Year <ul><li>To be sure your balances in QuickBooks agree with the final numbers </li></ul><ul><li>you reported: </li></ul><ul><ul><li>Verify Cash or Accrual Basis </li></ul></ul><ul><ul><li>Be sure dates are the same </li></ul></ul><ul><ul><li>Compare to the reports </li></ul></ul><ul><ul><ul><li>Once they match you can move on to setting the closing date. </li></ul></ul></ul>
  5. 5. The Trial Balance <ul><li>Balance shown for each account. </li></ul><ul><ul><li>Most detailed report </li></ul></ul><ul><ul><li>Least translation of terminology </li></ul></ul><ul><ul><li>(less accountant-ese) </li></ul></ul><ul><ul><li>All accounts and balances show on the same report </li></ul></ul>
  6. 6. The Trial Balance This may not be a familiar report to you, but your accountant uses it to review all your account balances. They most likely have already compiled one in order to prepare your company’s taxes or financial statements.
  7. 7. The Trial Balance
  8. 8. Financial Statements: Compare to The Balance Sheet and Profit & Loss <ul><li>Often accounts are combined for summarized presentation. </li></ul><ul><li>Some translations may be necessary from your accountant, but generally will follow your QuickBooks totals. </li></ul><ul><ul><li>Balance Sheet totals of Assets, Liabilities and Equity will all match. </li></ul></ul><ul><ul><li>Income statement compares to a QuickBooks Profit & Loss to verify all the balances for the year end. </li></ul></ul>
  9. 9. The Balance Sheet
  10. 10. The Balance Sheet Some balances may be combined, but totals will match
  11. 11. The Tax Return: Compare to your Balance Sheet and Profit & Loss <ul><li>Most Summarized Balances </li></ul><ul><li>Details often revealed on sub schedules. </li></ul><ul><ul><li>Various pages contain the data. </li></ul></ul><ul><ul><ul><li>1065, 1120, 1120S – page 4 = Balance Sheet </li></ul></ul></ul><ul><ul><ul><li>Schedule C or E business, no balance sheet is presented – many times not even prepared. </li></ul></ul></ul><ul><ul><li>Harder to put together unless you understand the return itself. </li></ul></ul><ul><ul><li>Better than starting from scratch. Especially with qualified help. </li></ul></ul>
  12. 12. If they don’t match… <ul><li>We have the opportunity to learn from the tax preparer’s experience. </li></ul><ul><li>Each adjustment is a lesson in correct accounting. </li></ul><ul><li>Also the entries are clues to what the information the accountant will need next year. </li></ul>
  13. 13. Making Journal Entries <ul><li>Journal Entries are accountant’s method to reclassify errors, correct totals and add missing data. </li></ul><ul><li>They will make your accounting totals correct, but not provide underlying details. </li></ul><ul><li>Consider them a lesson in how to improve and move ahead to minimize them for the following year. </li></ul><ul><ul><li>Correcting your original transactions is always more accurate for your own reporting. </li></ul></ul>
  14. 14. Making Journal Entries <ul><li>Ask your tax preparer or accountant for the Journal Entries they made to correct your QuickBooks. </li></ul><ul><li>Follow the report to add the same entries to your QuickBooks file. </li></ul><ul><li>Journal Entries will NOT: </li></ul><ul><ul><li>Affect individual customer/vendor account balances </li></ul></ul><ul><ul><li>Affect item based reporting </li></ul></ul><ul><ul><li>Affect inventory quantities </li></ul></ul><ul><ul><li>Affect payroll liabilities or tax calculations. </li></ul></ul>
  15. 15. Make Journal Entries
  16. 16. Make Journal Entries After 2006, is available in the Company Menu
  17. 17. Make Journal Entries You don’t have to know debits & credits, just follow the report!
  18. 18. Make Journal Entries <ul><li>Once you have correct the transactions or made journal entries, compare to your accountant’s reports for the fiscal year end. </li></ul><ul><li>If changes were made to the prior year data since you provided it to your tax preparer, that may account for the difference. </li></ul><ul><li>(Why we are learning to set the closing date) </li></ul><ul><li>If you have trouble, consult your advisor. </li></ul>
  19. 19. Setting the Closing Date <ul><li>Preserve your records. </li></ul><ul><li>This is as important as backing up your data. </li></ul><ul><li>This is the only way to protect yourself from unauthorized changes </li></ul><ul><ul><li>What are authorized changes? </li></ul></ul><ul><ul><ul><li>Amended tax return </li></ul></ul></ul><ul><ul><ul><li>Reissued financial statements </li></ul></ul></ul><ul><ul><ul><li>Edits to non-accounting information </li></ul></ul></ul>
  20. 20. Setting the Closing Date <ul><ul><li>Don’t pay your accountant to do last year’s books again next year! </li></ul></ul>
  21. 21. Setting the Closing Date <ul><li>First, Re-open your company file and </li></ul><ul><li>Login as the Administrator </li></ul>
  22. 22. Setting the Closing Date Review all user settings NO user should have this permission, but anyone you have selected “All areas” will have this permission.
  23. 23. Setting the Closing Date Correct user settings
  24. 24. Setting the Closing Date Correct user settings Choose accesses as appropriate, but every user should have “ No” chosen here.
  25. 25. Setting the Closing Date from the User List or Preferences You can even set a password to keep the Administrator from accidentally making changes.
  26. 26. Setting the Closing Date Now users are not just warned, they are prohibited from changing past data.
  27. 27. Setting the Closing Date <ul><li>You will have records that support your reported balances for the period in case of audit. </li></ul><ul><li>You will have the most accurate records for comparative analysis. </li></ul><ul><li>Your accountant may even give you a gold star when you bring in your data file next year! </li></ul>
  28. 28. Making Journal Entries and Setting the Closing Date <ul><li>Written & Compiled by </li></ul><ul><li>Anna M. Sheets, CPA </li></ul><ul><li>Advance Certified QuickBooks ® ProAdvisor SM </li></ul><ul><li>Accounting Made Simple </li></ul><ul><li>Valparaiso, Indiana </li></ul><ul><li>Learn more at: </li></ul><ul><li>www.AccountingMadeSimple.biz </li></ul>

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