How to Enter a Closing Password in QuickBooks Desktop?

Closing entries are entries that are created at the end of the fiscal year to transfer the balance from the Income and Expense accounts to Retained Earnings. The goal is to zero out your income and Expense accounts and then add the net income of your fiscal year to Retained Earnings. 

You need to reconcile your bank accounts and review your QuickBooks company file before sending it off to your accountant for year-end closing. The file you send is going to be the basis for your tax return and/or financial statements, so it is critical that the QuickBooks file remain unchanged once it has been sent to your accountant. QuickBooks has a built-in safeguard to prevent users from accidentally changing closed periods – a closing date password. It will help you to ensure that no one inadvertently makes a change that affects a closed period.

What is a closing date password in QuickBooks Desktop?

A closing date password in QuickBooks Desktop is a security feature that protects the financial data for a specific accounting period after the books have been closed. You can use a closing date and password to prevent changes that may impact your financial reports. This is why closing your books is important when a new fiscal year begins. Below we’ve discussed how to enter a closing password for both QuickBooks Desktop for Windows and QuickBooks Desktop for Mac. 

Why do you need to enter a closing password in QuickBooks Desktop?

Entering a closing password locks your particular books and prevents others from changing your accounting data before the closing date. It is crucial to see last year’s financial data. Closing your books makes sure everything stays as they are.

You can create a closing date password to restrict access to data from the prior accounting period, including the details of every transaction. A user must know the closing date password and have the appropriate permissions to modify or delete a transaction in a closed period. 

Things to Do Before Entering a Closing Password in QuickBooks Desktop

Entering a closing password is an important step as it prevents changes to the data for a specific accounting period. Before you lock the books and enter the closing password, it’s important to do such things, ensuring everything is accurate and complete. Here’s the checklist to follow:

• Complete your bank reconciliations for all accounts up to the closing date and make sure there are no uncleared or unaccounted transactions.
• Ensure that your income and expenses accounts are properly categorized, and no accounts are missing or misclassified.
• Check the transaction history for any significant changes, especially those made near the closing date.
• When setting a closing date, use a secure password to prevent unauthorized changes to prior periods.
• Share the password only with authorized personnel, such as your accountant or controller, to ensure that no one else can edit the closed period.
• Confirm that the closing date you are setting is for the correct period (e.g., month-end, quarter-end, or year-end). 
• Verify if any transactions are mistakenly entered in future periods and adjust them to the appropriate period.
• Once the password is entered, the period will be locked. Ensure that team members are aware of this and know that they cannot make changes to the closed period without authorization.

Steps to Set a Closing Date and Password in QuickBooks Desktop for Windows

1. Open QuickBooks and sign in as an admin.
2. Navigate to Company and then choose Set Clos​​ing Date.
3. Type a Closing Date and Closing Date Password.
4. Press the OK button.

Note: If you void a check dated before the closing date, with an expense account, you’ll get this message on your screen:

5. Press Yes for QuickBooks to create two journal entries to balance the accounts affected by the check. Creating journal entries is not mandatory. You can still void the check if you need to.

Steps to Set a Closing Date and Password in QuickBooks Desktop for Mac

1. Move to Company and then choose Users and Passwords.
2. Select Set Closing Date.
3. Enter a Closing Date and Closing Date Password.
4. Hit the OK tab.

Manually Enter a Closing Password in QuickBooks Desktop 

QuickBooks Desktop doesn’t require closing books as part of the year-end process. You need to set up a closing date and close date password to close the accounting period and limit the access. 

As of now, setting up the user’s permission to edit closed transactions in QuickBooks isn’t available yet. Each user can’t get their own password for editing closed transactions so we can only set one password. Once you change the date in QuickBooks, your user can only add bills after the closing date you’ve set up. The system follows the closing date set in the Company Preferences window. To do it manually, you have the option to remove and reopen the closed accounting period.

1. Hover over the Edit menu.
2. Choose Preferences.
3. Now, select the Accounting menu.
4. Hit the Company Preferences tab.
5. Press the Set Date/Password button under the Closing Date section.
6. Delete the date in the Closing Date field.
7. Click OK.

Bottom Line!

Every time you set the closing date, any period prior to that date will be password-protected from changes. If you try to make a change to a closed period you will have to enter the password to save the transaction in QuickBooks. Hence, you’re recommended to close entries with a password to prevent unintentional changes throughout the year.

A closing entry is a journal entry that is made at the end of an accounting period to transfer balances from a temporary account to a permanent account. This will help you to avoid any kind of changes to the QuickBooks account past books. If needed, you can edit the closing date along with the closing date password details from the particular Company Section. Users must know the closing date password and have the appropriate permissions to modify or delete a transaction in a closed period.

FAQs:

How do I turn off closing date password in QuickBooks desktop?

To turn off the closing date password in QuickBooks Desktop, follow these steps:

1. Open QuickBooks Desktop and go to the Edit menu.
2. Select Preferences.
3. From the left panel, choose Accounting.
4. Click on the Company Preferences tab.
5. In the Closing Date section, click the Set Date/Password button.
6. Simply delete the date from the Closing Date field.
7. Click OK to save the changes.

Note: This will remove the closing date restriction, allowing users to enter transactions without the need for a password. However, keep in mind that QuickBooks Desktop allows only one password for editing closed transactions. Multiple users can’t have individual passwords for this purpose.