When an accounting period comes to an end, you know it's time to close books and analyze the financial health of your business. Closing books means preparing documents like balance sheets or income statements that help make informed decisions.
These decisions affect the future of your business, and that's why you need to know how to close the books in QuickBooks correctly.
With QuickBooks, you can lock your books to prevent accidental changes and maintain data integrity for accurate analysis and reporting.
In this article, we'll see how to close the books in QuickBooks and get an accurate view of your business's financial performance.
Closing books in QuickBooks involves reviewing, making adjustments, and reconciling accounts. To begin with, backup data and run reports before deciding on a closing date.
The process of closing books in QuickBooks desktop is the same as the online. You can close QuickBooks in desktop or online.
Here are detailed steps of what you need to do.
Step 1: Review QuickBooks Year-End Closing Entries
Step 2: Close Books
If you're wondering how to close out a year in QuickBooks without missing a step, don't worry. You can use a QuickBooks year end checklist.
The checklist ensures you capture all the details in the book-closing process. Here's what you need to have on your list to help close year end in QuickBooks.
Before you close year end in QuickBooks, review the first month of that year to make sure it's accurate.
A fiscal year doesn't have to be the same as your calendar year, but reviewing and updating it allows QuickBooks to clear all your ledgers, which saves time. Meanwhile, you can work on other accounting duties.
Check and update all customer account balances and statements. The last thing you need is to discover that you've left out a customer's account balance during the QuickBooks close year end process. Leaving out information means you'll repeat the entire process or produce inaccurate financial reports, which affects business decisions and profitability.
Go through all the lender and vendor files and reach out to customers who haven't paid. With the right accounting software, you'll be able to see who owes you money. For example, review customer account balances as follows:
The advanced features in QuickBooks make it easier for you to take stock and know how much your inventory is worth.
As you enter the next fiscal year, you'll know exactly how much you have from the previous year. That's how to close the books in QuickBooks more accurately and get a clear picture of where your business stands financially.
Check supplier accounts to see if you have any outstanding bills and pay them. Also, review loans and discounts and pay your service providers.
Reconcile all accounts to get accurate data. When you close year end in QuickBooks. For example, check and reconcile the following:
To accurately close year end in QuickBooks, you need to reconcile your bank statement. Make sure you debit transactions and clear deposits.
All information in your balance sheet should match what is in QuickBooks. They should show an accurate figure, including tax returns and your previous balance.
Check your bank account information and ensure there are no errors. The information in your bank account should match what's in QuickBooks before you start closing books in QuickBooks. Correct any inconsistencies.
QuickBooks lets you run reports that show any issues that may arise when closing books. Reports help you identify and correct issues. Plus, you can create a profit and loss report to help you forecast business activities for the next year.
The report helps you plan activities that bring more revenue, and you can identify ways to save more.
After reviewing and working on all your financial data, it's time to close year end in QuickBooks. You close books when you set a closing date at the beginning of the process.
The date you've set means you've protected information from the previous year, and no one can edit transactions without using a password.
If you know how to close the books in QuickBooks, it's critical to ensure no one accidentally alters the information and files you've worked on.
QuickBooks has a feature that helps prevent such cases. So, if you want to know how to close the books in QuickBooks without worrying about a team member altering critical information, follow this procedure.
Step 1: Review the first-month fiscal year
Select the first month, then do the following
Step 2: Review account balances and statements and clear outstanding bills
To clear balances, run the following reports
Step 3: Check the reports and clear any outstanding balances
Step 4: Run your year end reports as follows
Step 5: Close year end in QuickBooks
For the Desktop version, you don't need to worry about how to close the books in QuickBooks.
Conclusion
Here are some commonly asked questions about how to close the books in QuickBooks.
QuickBooks makes some automatic adjustments, like clearing your income and expenses. This helps you start the new accounting period with zero. It also adjusts your net income accordingly.
Yes, you can run a year end on QuickBooks. You can also create different management reports like profit and loss or balance sheets.
They are entries at the end of each accounting period. The aim is to free your income and expense account in QuickBooks for the next year's entries.
Follow these steps
Close year end in QuickBooks is a process that lets you produce accurate reports. The locking feature in QuickBooks gives you peace of mind when following the steps above to close your books at the end of an accounting period. You can also produce reports that show the financial health of your business and help you make important decisions. With the right technology combination, users can close books online or use QuickBooks Desktop and Qbox. Qbox offers QuickBooks Desktop remote access and lets you share files and collaborate with users. Sign up, and new users will get the first 30 days free trial.