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.

9 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.

    Reply
  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.

    Reply
  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?

    Reply
  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.

    Reply
  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.

    Reply
  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.

    Reply
  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.

    Reply
  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.

    Reply

Leave a reply

required

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>