QuickBooks Closing Entries – Year-End Closing & Adjustment, Remove, View

A closing entry is a journal entry made at the end of an accounting period to transfer balances from temporary accounts to permanent ones. QuickBooks Desktop makes it easy to close the books at the end of the year, as it is a necessary procedure for any business. This simple-to-use software sits on your desktop and is ideal for keeping your financial records accurate and productive to facilitate tax season.

If you’re stressed about closing your entries in QuickBooks at the end of every fiscal year and unsure how to keep your business’s finances balanced, don’t worry! Stay tuned to this blog to learn how to perform QuickBooks Closing Entries with ease.

What is Closing Entries in QuickBooks: A Descriptive Overview

To manage your QuickBooks account properly, it’s important to close your entries at the end of each fiscal year. This should be done after you’ve made all the necessary adjustments. Once your books are closed, no further entries should be made for that year. While QuickBooks doesn’t require a specific month or date to close, it’s essential to ensure that you complete the closing process at the end of every financial year.

QuickBooks Closing Entry is the entry made at the end of the fiscal year when it comes to transferring the balance from income and expense accounts to Retained Earnings. This process zeros out your Income and Expense accounts and adds the fiscal year’s net income to Retained Earnings. It’s a necessary part of the accounting cycle as they allow businesses to create financial statements and efficiently file tax returns every month and year.

QuickBooks contains all your data for a long time and doesn’t delete until you condense it. Also, if your closing entries are not done accurately, or you missed out, then the software sends you notifications about updating or editing them. In this blog, we will clarify the entire procedure to zero out your income and close entries in QuickBooks.

Before closing the books, always consider the below mentioned points:

Restricted Access: You can create a closing date password to restrict access to data from the previous accounting period, which includes details of every transaction. A user must know the closing date password and possess the appropriate permissions to modify or delete transactions from a closed period.

Reporting: Any changes made after the closing date to transactions dated before or on the closing date will be reflected in the Closing Date Exception Report. To run the report, navigate to the Reports menu, select Accountant & Taxes, and then click on the Closing Date Exception Report.

What is the Objective of QuickBooks Closing Entries?

In general terms, QuickBooks Closing Entries stands for reconciling the account of your company. When the right time comes, closing entries in accounting allow businesses to start a new accounting period. At the start and end of every period, companies must open and close their temporary accounts in order to record and track their financial information for reporting purposes accurately. This process shifts the balance of funds and leads the closing balance to zero.

The main reason for recording the transaction is to know whether the company’s retained earnings account reflect any increment in revenues from the previous year and show lessened dividend payment and expenses. On the other hand, Retained earnings are those earnings that are not distributed among shareholders in the form of dividends and are retained for further investment.

Pointers to Write Down Regarding QuickBooks Closing Entries!

• Closing entries are the entries made at the end of every fiscal year to transfer the balance from the Income and Expense accounts for Retained Earnings. The purpose is to zero out your Income and Expense accounts and then add your fiscal year’s net income to Retained Earnings.
• Closing entries are made after you record all your adjusting entries. 
• Once the books are Closed, then you cannot input any entry for the fiscal year. 
• QuickBooks Desktop lets you enter transactions that affect the balance of the closed fiscal year. Hence, the program either tells you that it isn’t recommended or asks for the closing date password if you set up one.
• QuickBooks Desktop doesn’t have an exact transaction for closing entries created automatically. When you run a report like Quick Report of Retained Earnings, the program calculates the adjustments.
• But you can’t Quick Zoom on these transactions, unlike the manual adjustments that you recorded. For QuickBooks Desktop for Mac, you can choose the report and then select Company & Financial. The Balance Sheet Standard will show the retained earnings account in the Equity section.

Automatic Year-End Adjustments Made by QuickBooks

QuickBooks conducts certain year-end adjustments based on your fiscal year start month.

Here’s how:

• At the end of every year, QuickBooks adjusts your income and expense accounts to zero so that you can start your new fiscal year with zero net income.
• Your net income receives adjusting entries made by QuickBooks. Let’s understand this with an example: If your for the year was $12,000, the equity section of your balance sheet appears as a line for a net income of $12,000 on the last day of your fiscal year.
• At the beginning of the new fiscal year, QuickBooks maximizes your Retained Earnings equity account by the net income of the last year ($12,000 in this example) and deducts your net income by the same amount. At this point, you have a net income of zero at the beginning of every new fiscal year.

How to Make Year-end closing entries in QuickBooks Desktop?

In QuickBooks Desktop, you don’t need to manually close your books each year— QuickBooks handles automatic adjustments for the next fiscal year, but creating a manual year-end closing entries ensures accuracy, especially if your finances are complex or involve multiple accounts. Here’s how to do it:

Step 1: Review and Backup

• Before starting, review your books and back up your data to avoid data loss.

Step 2: Access Year-End Closing

• Go to the “Lists” menu, choose “Chart of Accounts,” then from the “Account” dropdown, select “Year-End Closing.”

Step 3: Close or Carry Over Accounts 

• For each account, choose whether to “Close” it or “Carry Over” to the next year.

Step 4: Review Report

• After making your selections, QuickBooks will generate a report with your closing entries. Review it carefully.

Step 5: Verify Data

• To finalize, go to the “File” menu, choose “Utilities,” then “Verify Data” to ensure all data is correct.

Step 6: Finalize the Closing

• If everything is correct, select “Finalize Data” to complete the closing process.

Important Checks:

• Annual Profit & Loss report
• Income Statements
• Cash Flow Statement

How to close out QuickBooks Desktop for the year?

To close out the year in QuickBooks, follow these simple steps:

Once you’ve completed these steps, your QuickBooks is successfully closed out for the year!

Before Closing Your QuickBooks, have a Look at These Important Considerations

Benefits to Closing your Books

To Restrict access to the data from the accounting period, including the details of every transaction, you can create a closing date password. In case you want to edit or delete the transaction in a closed period, it is important to know the closing date password and have the appropriate permissions.

Reporting:  If you made any changes to your transactions before or after the closing date, this could be seen in the Closing Date Exception Report.

• Navigate to the Reports Menu to run the report and choose Accountant & Taxes, then Closing Data Exception Report.
• The user who sets the closing date is displayed in the Closing Date History along with the current or previous closing dates.

Benefits of Not Closing your Books

Detail: You get easy access to the last year’s data which includes every transaction info.

Reporting: You can create comparative reports between the current year and the previous year.

What Type of Account Do You Need to Open and Close?

During the reporting cycles, many temporary accounts are created for accounting purposes. Temporary accounts are the type of accounts that must be opened and closed. These accounts can be found in the accounting ledger, specifically the general ledger of accounts. This ledger is basically used to record all transactions over the specific accounting period in question. The list of general ledger accounts with their balances is known as the Trial Balance.

Temporary accounts are totally different from permanent accounts, which do not.

Temporary accounts

• Sales discounts
• Miscellaneous expenses
• Earned interest
• Utilities
• Dividend account
• Rent

Permanent Accounts

• Accounts Payable
• Owner’s Equity
• Inventory
• Accounts Receivable
• Shareholder’s Equity
• Retained Earnings

Thus, all accounts associated with the revenue and expenses of the business must be part of the opening and closing process. If your company is incorporated, then any dividend accounts (how your business distributes the share of the profits to shareholders) must be closed and opened each period your company is integrated.

Troubleshooting the Closing Date Mistake in QuickBooks!

Accuracy in QuickBooks accounting books thoroughly relies on how correctly the dates of the multiple transactions have been put in. If there are any discrepancies entering the date, it can lead to inaccurate accounting books. To settle this issue, you need to follow the below-listed instructions for QuickBooks year-end closing.

Firstly, you have to set the closing date and password under the company preferences section. When you enter your password, you can look at the previous year’s info.

After logging-in then, do the following:

• Press Edit.
• Navigate to the Preferences to see the closing date option.
• In the Accounting Preferences tab, choose Company Preferences.
• At last, you must enter the Date & Password selected.

Simple Steps for Closing Entries in QuickBooks Online!

To close entries in QuickBooks Online, review and verify your accounts, then close your books to prevent changes before filing taxes. Set a closing date and enable password protection for edits, ensuring your financial data remains secure and accurate for the year-end. Checkout the Step by Step guide below…

Note: If you’re going to close out the year, you need to close your books to prevent unwanted changes before filing your taxes. This will seal your books so no one can edit your accounting data prior to the closing date.

When you review the financial data of the previous year, closing your entries ensures everything stays the way you want it to. It also restricts any accidental changes that could affect your financial reports.

Step 1: Verify Your Accounts

1. To begin with, log in to QuickBooks Online as a primary or company admin.
2. Now, review your accounts and make sure everything looks good.
3. You must enter any outstanding invoices, expenses, and payments.
4. After this, reconcile your accounts up to your closing date.
5. Finally, check your inventory quantities.

Step 2: Close Your Books

1. First, head to Settings and then choose Accounts and Settings.
2. Next, hit the Advanced tab.
3. Under the Accounting section, click Edit.
4. Afterward, turn on the Close the Books switch.
5. You have to write down a closing date. Give yourself a comfortable deadline. You are not supposed to edit any transactions before this Date. Your new bookkeeping work will start after this point.
6. If you want to need a password before modifying your closed books, then click on Allow changes after seeing a warning and entering a password option from the drop-down menu.
7. This will show the drop-down menu that allows you to create a password when you close your books.
8. To finish, press Save and hit Done.

How to Remove Closing Entries in QuickBooks Online?

To remove QuickBooks online closing entries, transfer the credit balance to the Income Summary Account, zero out the Expense Accounts, address any discrepancies between credit and debit amounts, and finally, close the Dividend Account, adjusting retained earnings accordingly. This ensures accurate financial data management. Follow step by step guide below:

Step 1: Transfer Credit Balance to the Income Summary Account

1. First of all, search for the Revenue Accounts under the Trial Balance, which will contain the revenue and capital accounts located in the ledger of your company.
2. You will now be directed to the Credit Balance that is reflected here, and you have to make some Debit Entries for each of the revenue accounts to convert it to zero.
3. Once done, the credit balance will automatically move to the Income Summary Account.

Step 2: Change Expense Account Total to Zero

1. Under the Trial Balance, you have to detect the Expense Accounts, where you will find a debit balance.
2. Under the specific Income Summary Account, perform a Credit Entry for every Expense Account.
3. This makes the Expense Account total to be zero.

Step 3: Credit Entry Amount Surpassing the Debit Amount

Now if you are in a situation wherein Income Summary Account will show a credit balance even after completing the entries, or you view a Credit Entries Amount exceeding the debit amount, this term is known as Net Income. However, if you find the debit balance exceeding the credits, then it is called a Net loss.

Step 4: Close the Dividend Account

Removing closing entries in QuickBooks is to close the Dividend Account with respect to retained earnings. You will observe that the Dividend Account has the usual debit balance, and the retained earnings will pop up the Net Income amount which was initially given to it.

Let’s Wrap it Up!

Hopefully, the above-given information is useful for you. But if you still facing any kind of issues with your software and need professional assistance, regarding accounting, bookkeeping & accounting software-related issues then feel free to get in touch with us at +1-802-778-9005, or you can mail to us at: [email protected]

Frequently Asked Questions:

What is Closing Entry in Accounting?

A closing entry is a journal entry made at the end of an accounting period. It transfers the balances from temporary accounts, like revenue and expenses, to permanent accounts on the balance sheet. This resets the temporary accounts’ balances to zero, preparing them for the next period’s transactions.

How Many Closing Entries are Available in Accounting?

There are basically four closing entries such as; Closing Revenue to Income Summary, Closing Expenses to Income Summary, Closing Income Summary to Retained Earnings, and Closing dividends to retained earnings.

How how to See closing entry in QuickBooks?

To view closing entries in QuickBooks, any changes made after the closing date can be tracked using the Closing Date Exception Report. This report highlights all adjustments to transactions dated on or before the closing date.

Here’s how to generate the report:

• Step 1: Go to the Reports menu.
• Step 2: Select Accountant & Taxes.
• Step 3: Choose Closing Date Exception Report.

Additionally, the Closing Date History report shows the current and previous closing dates, along with the user who set them.

What Do You Understand by Trial Balance?

A trial balance is a bookkeeping worksheet wherein all the ledger balances are compiled into equal debit and credit account column totals. Every company prepares a trial balance usually at the end of the reporting period. The general purpose of generating a trial balance is to ensure that the company’s bookkeeping system entries are mathematically accurate. Also, it contains all the major accounting items, such as assets, liabilities, equity, revenues, expenses, gains, and losses.

Can A Net Income Be Calculated?

Yes, of course, Net income is what the business has left over after expenses, including salary and wages, cost of goods or raw materials, and taxes. While for an individual, this is the take-home money after deductions of taxes, health insurance, and retirement contributions.

How to change the closing entry in quickBooks desktop?

To change the closing date in QuickBooks Desktop, follow these steps:

• Step 1: Go to the Company menu and select My Company.

1. Click the Pencil icon next to the Company Information.
2. In the Report Information section, change the Fiscal Year end month.
3. Select the desired month (e.g., choose July if you want the fiscal year to end on June 30th).
4. Click OK to save the changes.

This will update your fiscal year without affecting report dates. To adjust specific report periods, you’ll need to modify them manually when running the reports.

How to Change or Enter a closing password in quickBooks desktop?

In QuickBooks Desktop, you can set a closing date and password to prevent changes that might affect your reports. It’s recommended to close your books at the start of a new year.

Here’s how to enter a closing date and password in QuickBooks desktop:

1. Open QuickBooks and log in as the admin.
2. Go to “Company” and select “Set Closing Date.”
3. Enter a closing date and a password (Enter a new password in the Closing Date Password field if you didn’t set before)
4. Click “OK.”

Note: If you void a check dated before the closing date, you will receive a message warning about the change.

Here’s how to set a closing date and password in QuickBooks Desktop for Mac:

1. First, Go to Company and select Users and Passwords.
2. Select Set Closing Date.
3. Enter a Closing Date and Closing Date Password.
4. Select OK.