Year-end tasks include activities that correspond to your fiscal year as well as activities that correspond to the calendar or tax year. If the fiscal year for your company is different from the calendar year, then you might face some of these year-end tasks in the month your fiscal year ends. The following tips should help:
Remember that payroll-related tax forms (such as W-2s, the quarterly Form 941, and the annual Form 940) are due on specific dates, regardless of your fiscal year. If you subscribe to QuickBooks Assisted Payroll, then the service handles many of those tax forms for you. Subscribers to all QuickBooks Payroll services can learn more about year-end tasks and payroll taxes at the QuickBooks Year-End Center and in the Year-End Guide (in QuickBooks 2007 and 2006, choose the Help menu and select Year-End Guide). Plus, visit the Clickable Tax Forms site for detailed help with tax forms.
1. Know About the Adjustments QuickBooks Performs at the End of Your Fiscal Year
QuickBooks performs certain year-end adjustments based on the month you chose as the start of your fiscal year. (To see what month you chose, from the QuickBooks Company menu, select Company Information.)
At the end of each fiscal year, QuickBooks automatically makes the following adjustments:
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.
2. Decide Whether to Close Your Books at the End of the Fiscal Year
Unlike many accounting systems, QuickBooks does not require that books be closed at the end of an accounting period. Because QuickBooks does not formally close out any accounting period, you can enter transactions for any time period.
Advantages to closing your books
Advantages to not closing your books
You can restrict access to the transactions of prior accounting periods, so no one can view transaction details or change transactions without your knowledge. You restrict access by setting a password. To modify or delete a transaction in a closed period, a user must know the closing date password and have the appropriate permissions.
Any changes made after the closing date to transactions dated on or before the closing date will appear in the closing date exception report.
You always have easy access to last year's data, including the details of every transaction.
You can create comparative reports between this year and last year.
Closing your books. You close your books by setting a closing date. You can also limit access to the closed accounting period by setting a closing date password.
If you decide to set a password, QuickBooks requires the password for changes that would alter balances for the accounting period you have closed. This includes adding, editing, or deleting transactions dated on or before the closing date. You can change the password at any time.
To close your books, change your close date, or set a closing date password:
Go to the Edit menu and click Preferences.
In the Preferences window, click Accounting in the list on the left.
Click the Company Preferences tab.
In the Closing Date section, click the Set Date/Password button.
In the Date section, select the date through which you want your books to be closed.
(Optional, but recommended) Enter a password in both the Password and Confirm Password fields to limit access to the closed accounting period.
Click OK.
Alternatives to closing your books. As an alternative to closing your books, you could condense or archive the company file. Or, if you have Standard or Enhanced Payroll, you could create a new company file for each year. Assisted Payroll customers should not create a new company file.
For more information on these topics, please refer to the following articles:
3. Check That Employee Vacation and Sick Time Accruals Are Set Up Correctly
In QuickBooks, you set the date when employee vacation and sick time begins accruing, and you have the option of resetting the accrual to zero at the beginning of a new year. To reset employees' sick and/or vacation time to zero at the beginning of the year, you should verify that the Reset hours each new year? checkbox is selected in each employee's record.
To verify that employees' sick and/or vacation time resets to zero at the beginning of the year:
In QuickBooks 2006 and 2007, click Employee Center and then click the Employees tab.
In QuickBooks 2005, from the Employees menu, choose Employee List.
Double-click the employee's name.
Click the Change tabs drop-down arrow and then click Payroll and Compensation Info.
Click the Sick/Vacation button.
If you want sick hours to reset to zero when a new accrual year begins, make sure the Reset hours each new year? checkbox is selected in the Sick section of the window.
Verify the start date of the accrual year.
If this employee accrues sick time on your fiscal year, this date should be the first day of your fiscal year.
If this employee accrues sick time on a calendar year, this date should be January 1.
If this employee accrues sick time on a different schedule, for example an anniversary year, this date should be the day that that year begins.
If you want vacation hours to reset to zero when a new accrual year begins, repeat steps 5 and 6 for the Vacation section of the window.
You should back up your QuickBooks data regularly, and most especially at year-end. For detailed instructions, see the topic "Back up company files" in QuickBooks Help.
QuickBooks Payroll Bulletin Editor: Lise Quintana Publisher: Intuit
We welcome your suggestions and feedback! Unfortunately, we cannot respond to requests for change of address, technical support, or sales information.
E-mail us at payroll_editor@intuit.com
The information contained in the QuickBooks Payroll Bulletin is meant to provide general information about the payroll process and is not intended to provide tax or legal advice. Always consult your tax professional when preparing tax documents.
