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Closing Your Fiscal Year in June
QuickBooks performs certain year-end adjustments based upon the month you chose as the start of your fiscal year. (If you're not sure what your current close month is, you can view it in QuickBooks. Choose Company Information from the QuickBooks Company menu.)
QuickBooks makes these important year-end adjustments at the end of each fiscal year:
Closing Your Fiscal Year
QuickBooks automatically transfers your net income (the difference between your gross profits and your expenses for the current fiscal year) to an automatically created Retained Earnings account (the cumulative sum of net income from previous fiscal years).
QuickBooks zeros out all of your income and expense accounts (which comprise your net income) and posts the totals to the Retained Earnings account. Therefore, you start the new fiscal year with a zero net income.
For example, if your net income (gross profit minus expenses) for the fiscal year ending on June 30 was $20,000, the equity section of your Balance Sheet would show a line for net income of $20,000. On July 1 of the new fiscal year, QuickBooks would increase your Retained Earnings equity account by the previous year's net income ($20,000 in this example) and decrease your net income by the same amount.
Should You Close Your Books?
Unlike many accounting systems, QuickBooks does not require you to close your books at the end of an accounting period. Because QuickBooks does not formally close out any accounting period, you can always enter transactions for any time period.
A major reason for closing your books in QuickBooks is to restrict access to the transactions of prior accounting periods, so that no one changes the transactions without your knowledge.
What happens when your close your books:
You set a closing date.
Transactions entered on or before the closing date are protected by a password.
To edit or delete a closed transaction, the user must know the closing date password and have privileges to modify closed transactions.
Advantages to not closing your books:
You always have easy access to last year's data, allowing you to view a transaction's details and even make changes to it.
You can create reports to compare this year's data with last year's data.
You can enter transactions whenever you need to, without worrying about whether or not they are from the current period.
Setting a Close Date
To close your books, change your close date, or set a closing date password:
From the Edit menu, choose Preferences.
In the Preferences window, select Accounting.
On the Company Preferences tab, enter the date through which you want your books to be closed.
(Optional, but recommended) Create password to limit access to the closed accounting period:
- Click Set Password.
- Enter the new password in both the New Password and Confirm New Password fields.
- Click OK.
Click OK.
Find out more details about June closing and other year-end tasks, visit the QuickBooks Year-End Center.
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