At the end of every year, closing your books is a key step for every business. This will also make sure no one can accidentally modify your financial data; it also prepares you for taxes and gets you able to start fresh in the new year. This is an easy process when you use the right steps, and you can import directly if you are on QuickBooks Desktop. In this blog, we would guide you on the process of close your books in QuickBooks Desktop.
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Why Do You Need to Close Your Books?
Before diving into the steps let’s briefly discuss the importance of closing your books.
- Mitigates Mistakes: No one can alter past transactions once you close your books without the password.
- Ensures Accurate records: You know for sure that your reports reflect your actual income and expenses
- Prepares You for Tax Time: It cleans up your data and gets it ready to send to your accountant.
Close Your Books in QuickBooks Desktop: A Step-By-Step Guide
1. Review and Reconcile all Accounts
Ensure that your bank and credit card accounts are all reconciled. Moreover, reconciling makes sure your QuickBooks records agree with your bank statements.
To do this:
- Go to the Banking menu
- Choose Reconcile
- Pick your account, and type in your statement details
Select each transaction that shows up in both your bank statement and QuickBooks. If the difference is $0.00, you are done.
2. Run Key Financial Reports
Now, you might want to open your books before closing them. These allow you to see how well your business did and enable you to address any issues before completing the paperwork.
Important reports to run:
- Profit and Loss Report: Income and expenses
- Balance Sheet: List what you own and what you owe
- Trial Balance: Assists with ensuring your debits and credits are brings together
To run a report:
- Go to Reports at the top
- Choose the report you want
- You must set the right date range (usually full year)
- Adjust for year-end (if necessary)
You must make minor modifications to your books before you launch. These can include:
- Fixing any incorrect entries
- Recording depreciation
- Incorporating interest income or factoring in loan balances
This is a step that may require assistance from your accountant. Before proceeding, ensure that everything is in order.
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3. Backup Your Company File
Make sure to do a backup of your company file before closing your books. You’ll be glad you saved a copy if something goes wrong.
To back up:
- File > Back Up Company > Create Local Backup
- Select Local Backup and look through the wizard
- Store your backup somewhere safe such as an external drive or cloud storage
4. Establish Closing Date and Password
Now you’re prepared to close your books.
To do this:
- Go to Edit > Preferences
- Choose Accounting on the left
- Select the Company Preferences tab
- Lastly, click on Set Date/Password under Closing Date
Once done, no one will be able to edit the transactions prior to your closing date without having the password.
Key Takeaways for Closing Books
- Double-Check Everything:
Don’t rush because it is easier to address problems than once the books are closed.
- Communicate with Your Team:
If others use QuickBooks, inform them you’re closing the books. Do not tell them to change anything from the last year.
- Update Your Accountant:
Provide your accountant with your closing date and password, if necessary, also they might want to look at your data or recommend changes.
After You Close your Books, What Happens?
- Data Becomes Locked
After your books are closed, all transactions prior to the closing date are protected by QuickBooks. Only the password can be used to make changes.
- Reports Become More Reliable
Your reports now reflect year-ending numbers. It simplifies filing taxes or applying for loans.
- You Begin a Fresh Financial Year
You can then continue recording data for the new year. If your books are clean, your business is much more primed for growth.
Wrapping Up
Closing your books is a good practice to safeguard your financial records and to prepare for the new financial year. It includes reconciling accounts, running reports, making adjustments, backing up data, and setting a closing date and password moreover, all these steps will help you maintain clean and accurate books.
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Get In Touch with Us
If you are interested to know more about QuickBooks as an accounting software tool and how can it help you to close your financial books yearly, we are here to help you through our dedicated customer service team. Fill out the customer response form or feel free to reach to us at support@qbhelphub.com . Our highly competent team is here to solve all your queries regarding QuickBooks.
