In traditional accounting (and traditional accounting software) you ‘close the books’ at the end of a year. How do you do that in QuickBooks? Short answer: You don’t.

Right or wrong, QuickBooks keeps your accounting data around more or less permanently. You can run the QuickBooks archive/condense/clean up command (the naming of it differs across versions) but that has limited results. You can have your file supercondensed. But otherwise, your transaction history sticks around pretty much forever.

That’s a good thing for running historical reports whenever you want.

The potential for problems, however, comes through the ability to add, change, or delete entries made in a prior year — after you have already filed your company’s taxes. Definitely a no-no.

So how can you avoid that? It’s easy. Use the Set Closing Date and Password command in QuickBooks. That will more or less lock down your prior years’ information so that it cannot be altered without your controlled permission.

With your company file open in QuickBooks, click Edit / Preferences. Select the Accounting preference in the left pane. Then click the Company Preferences tab. You’ll see this:

QuickBooks company preferences screen

Click the button at the bottom called Set Date/Password. Here’s what you’ll see:

QuickBooks Set Closing Date and Password screen

This screen represents powerful accounting control for you.

At the Closing Date prompt, enter the date at which you want to restrict any changes (e.g. December 31 of the previous year).

Enter a password that is unique for this purpose (don’t recycle a user’s password here). Reason? If anyone tries to make a change to a transaction in a “closed” year, they won’t be able to do so without knowing this special password.

If you don’t create a password here, anyone who tries to enter or change a transaction prior to the closing date will get a warning, but will still be able to make the entry. You are leaving the door open to all kinds of problems if you don’t create a password here.

There is a checkbox to exclude sales orders, estimates, and purchase orders from the closing date limitation. Why? Well, those kinds of entries aren’t actually accounting transactions — they don’t post to your general ledger or subledger account balances, so changing them doesn’t change your financial reports. You may or may not want to check the box, depending on your accounting control policies and how you handle those kinds of pre-transactions in your business.

Close the books in QuickBooks? Not really. But that doesn’t mean you can’t control the the books.

29 thoughts on “How to Close the Books in QuickBooks

  1. We have QB Prem Manufacturing 2010. The Set Closing DAte and Password window does not have exclude estimates, sales orders etc from the restriction. We are constantly in those areas and find setting the closing date a problem.

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  2. Another problem with the closing date, is that in spite of having a closing date if someone voids an invoice or bill in prior year Quickbooks allows it to happen. I’m always having to monitor that to see what someone has changed.

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  3. I find trouble with closing the books in QuickBooks in that you can not make changes to vendor or customer addresses on any “closed” information. With a CFO that closed the books in the middle of the tax year at various month ends, it was very difficult to resend any invoices with updated permanent information. Is there a solution as many of my client use QuickBook?

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  4. Glenda, that’s a good example of why it helps to have a “closing password” set for that…one would have to know the password to be able to make changes like that, so you retain control.

    Jeanette, that’s the double-edged sword of the “closing”. Can your CFO give you access to the closing password? I assume that’s what is slowing you down…

    Thanks for your comments and questions.

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  5. You are definetly correct that the books must be locked, as you describe. But i have found a serious achillie’s heel with this feature. if the bookkeeper has his/her own login, this will work. but if you are using a standard user name, then anyone with access to that user name can just go and erase the password, without being challenged at all.

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  6. Hello Dovid, yes that would be a problem. There are many potential security problems if everyone shares the same username. Best to have individual usernames with access for each restricted to their particular work areas.

    Thanks for the comment.

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  7. QB really needs to create two closes. A hard close for year end and a soft close leaving open sales orders and PO’s. These items can change your GL as it has happened to me. If someone changes a PO that has been received against, it will change the GL.

    Monthly financials are issued to banks, BOD’s and used for all kinds of tax returns, so closing them is just as important as closing a year end. QB needs to correct this in the software. They should easily be able to associate a close with any edit that will change the GL vs. edits that only correct things like addresses or descriptions.

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  8. Hi Sean,

    I’m not sure why changing a PO would change the GL…what accounts would it change? Changing an item received definitely would though.

    As to closing monthly vs. yearly, I don’t see any reason why you couldn’t set a close date at the end of every month if you wanted to (once all the entries for the month are made, of course).

    Not sure about the restriction on GL-only changes vs. non-GL changes. Would you really want people to be able to go back and change the address or description on old invoices or checks? Doesn’t sound like good accounting control to me, but maybe you mean something else.

    Thanks for your comments.

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  9. Hi, I am using QB online, and when setting up the closing date, I though all previous transactios won’t show up, for the reports it’s hard to be correcting the time, since it show me 2007 transactions, any idea on how to hide those previous transactions and start showing only from 2013 to today? Thanks in advance.

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    • Hi Veronica,

      I don’t know the online version, but I would guess that you would make the change for that by changing the reporting dates, not the closing date. The closing data simply prevents people from making changes to the data before that data. But when you run reports and it displays the information, you can then change the date ranges you want it to report from. Thanks for the question.

      Reply
  10. Question on Closing: we have been using QB for many years but have never associated PO’s with vendor invoices until very recently. When we do that it take a very long time for QB to search trough all the old PO’s that go back to 1999. If I do what you recommend above for everything before Dec 31, 2014 will that eliminate reduce that problem?

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    • Hi David,

      No it won’t. If you are using version 2012 or higher, you could try running the condense command, and select the option to delete POs. (Try it on a COPY of your company file, not the live file. It sometimes messes things up.) If that doesn’t work, we can supercondense your data, and as part of that, get rid of the old POs.

      Thanks for your question.

      Reply
  11. If you use the close function, what happens to invoices received after this which are dated for the already closed period?

    For example, if we were to close the June period on 4th July, but then received invoices dated June the day after.

    Do they still get posted with a June date but into the July period and therefore can be matched against an accrual?

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  12. Andy,

    If you close as of July 4, then you can’t post any transactions dated before that unless you use the close password. If you enter that password, then you can enter them with whatever date you want.

    Thanks for the question.

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  13. Intuit told me a way to close old PO’s, we have over 22,000 of them, was to close our current company say through December 31, 2010 and then open a new company as of January 1, 2011 transferring all the old account lists, employees, vendors, etc., into the new company. That way we will only have old PO’s that go back five years which would help our situation greatly.

    The other thing they said to do was to “close” old PO’s one by one but that is a huge task that will take many hours. Is there any other was to mark old invoices as closed where we can close large amounts at a time?

    I have read your reference to “condensing” which does not sound like it will do much as well as “supercondensing” which you do.

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  14. David,

    Yes, you can always just start a new company and bring over some info. from the old. The problem is that doesn’t include transactions or balances, so to recreate those in the new file is a pain.

    There’s not a way to mass close POs or invoices that I know of.

    Thanks for the questions.

    Reply
  15. I have set the close date for our company as 07/31/14. We are trying to enter invoices and other transactions in Aug, 2014 and later. QuickBooks will not allow this to happen. It doesn’t ask for a password. We have tried rebooting, resetting, etc. Nothing seems to work. We had to re-enter the closing date at 07/31/13. We have to be able to have a closing date. Is there a solution?

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    • Hi Karlene,

      Hmm, that doesn’t make much sense. What message does it give you when you unsuccessfully try to enter a transaction in Aug. 2014? Will the file pass verify (File / Utilities / Verify) in its current condition?

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      • The administrator can enter anything, but anyone else it says they don’t have authorization to enter into the period, even though the period they are entering into isn’t closed. Several people have tried.

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        • That’s interesting. Try this: create a new test user, give it full permissions, and see if you can enter transactions in the period when you are logged in with that test user’s credentials. Let me know the results of that and we can go from there.

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  16. I just started with a company who has used QB on-and-off for a few years, and I am currently getting all entries entered for 2014. What do you suggest I do about entries from previous years that are throwing off the company’s current financial situation. I’d like a fresh start.

    Reply
  17. Hi Melissa,

    You should maybe check with your accountant about that. Journal entries could be made so that your beginning balances coming in to 2014 were correct, but you’d want to check with him/her.

    Alternatively, you could get a clean sweep for your file, which sets all balances to zero and removes all transactions. See http://quickbooksusers.com/cleansweep.htm . But if you have been entering 2014 transactions already, you’d have to redo all or a lot of that.

    Just some ideas. Thanks for asking.

    Reply

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