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.

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78 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?

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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.

    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
  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.

    Reply
    • 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?

    Reply
    • 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?

    Reply
  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.

    Reply
    • After opening the books to enter invoices in a past, closed, period I assume financials need to be updated as well. This could become an issue. Is there a “best practice” for handling this situation?

      Reply
      • Hi Michelle,

        Yes, so if you enter invoices into a past, closed period, that will of course post those entries to the past financials, and that could well be an issue. I’d suggest that you check with your CPA on best practices for that. Thanks for the question.

        Reply
  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.

    Reply
  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?

    Reply
    • 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?

      Reply
      • 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.

        Reply
        • 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.

          Reply
        • We have the same issue with the closing date being July 31, 2015. I am trying to pay bills and it wont let me with out entering the closing date. I can do it if I am logged in as admin but not if I’m logged in as myself. Very frustrating… please help

          Reply
          • Hi Marguerite,

            If you are using Enterprise, if you assign yourself the same roles as the admin, it should let you do it. If you are using Pro/Premier/Accountant, if you set the permissions the same, it should allow it. Thanks for the question.

            Reply
  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
  18. dear Shannon,

    I am getting very strange problem in QB. i have setup closing date and password 31/12/2014 with admin privilege login but when users login into the company they cannot edit till 12/12/2014 but they can edit 13/12/2014 to 31/12/2014. i don’t understand what is happening. please help

    Reply
  19. Dear Shannon,
    just other users are getting this problem. admin is not getting any problem as well one user. we have work 5 users connected at the time but one user unable to edit till 31.12.14 rest 4 users are unable to edit only till 12.12.14. we set up closing same for all users.

    Reply
  20. Hi Shannon – thank you for the great info and guidance. I am new at the company and replacing someone. The person before me never “closed” the books. I come from the school of doing a monthly closing. I am nervous about using the “Set Close Date” feature. Do I merely set the date for month end each month? Do I have to “reopen” the books in order to get new data entered? I do not want to lock me out and I also do not want to mess up the books.

    Reply
    • Hi Bonnie,

      Yes, you can set a closing date at the end of each month, and assign it a password. If you need to make an entry for an earlier date, it will simply prompt you for that password and you can make whatever entries you want. Thanks for the question.

      Reply
  21. The inability to enter an invoice with a prior period date without affecting the prior period is a big problem. Once you’ve closed a period and published financial statements, you don’t want to change them just because, for whatever reason, an invoice might have not been posted in the correct period. But you also don’t want to enter an invoice with a wrong date.

    I’ve never seen a system where the invoice date is the same as the posting date. What am I overlooking here?

    Reply
    • Hi Cheryl,

      So what kind of scenario are you thinking of? Correcting an invoice where the date had been entered wrong, but to correct it would change that year’s financials? Or something else?

      Reply
  22. Hello Shannon,
    I am in a sticky situation. I took over the office manager position recently and saw that there are multiple invoices from 2014 on our AR report that shows that they still owe us, however, they did indeed pay us. 2014 has been closed by our CPA (who recently resigned), but I need them to be removed from our AR report. How would I be able to accomplish this without messing up our 2014 books for taxes, which has already been filed? I have the lock password, but I don’t want next tax season to be a pain for us.

    Reply
  23. Hi there, Shannon-
    I’m trying out Quickbooks online for now. I’m a small business so don’t need a lot. What I’ve done and trying to do is this:
    I’ve downloaded statements back from my account from the last 4 years and am hoping to separate/divide them into years. How might I do that?
    thanks in advance

    Reply
  24. Hi, Our company purchased QB Enterprise 2015. We entered 2015 Opening Balance dating 31-12-2014 & passed JE Opening Balance Equity to Retained Earnings. What I need to do after this much. Can I able to continue to enter financial data for 2015.

    Reply
  25. Hello Shannon,
    Under 2009 QB version, can we lock down the transactions monthly basis? New bookkeeper has no experience and making me crazy amending all i have checked through.

    Reply
  26. We used QB Enterprise 13. The books weren’t locked up through YE 2015. The CPS locked everything, now I can’t give inventory items corrected COGS or Revenue account numbers. (The chart expanded and now have detailed sub items). She “unlocked” and we still get the message needing to enter a password to save. Her concern is if the COGS account number is given a new COGS number, that it would affect prior year’s accounts and taxes. Question is, do you really need a password when unlocked to update COGS or Revenue or even type of accounts? Would changing the COGS or Revenue account number affect prior years accounts and taxes that were based on the original account numbers?

    Thank you!

    Reply
    • Hi Dawn,

      I’m not sure I’m totally tracking with you, but you might want to check with a CPA for issues relating to changing prior years’ data and possible effect on prior years’ financials and taxes. Thanks for your question.

      Reply
  27. Hi Shannon,

    i have very strange problem. i have set up year end closing with admin user till 31.12.2015. but when i tried to edit with different username and password which we created for our client. they cannot edit till 10.12.2015. they can edit from 11.12.15 to 31.12.15 entries.
    then i check with another user ID, they cannot edit till 15.11.15, they can edit from 16.11.15. to 31.12.15. it will be high appreciation if we get any solution.

    thanks
    Nizam

    Reply
  28. Question I was inserting a bill for a sub-contractor after then I went to bill pay. On that screen I saw the bill of sub to be paid, but I also saw a few transactions that has dates of two years ago, I asked the only other person (co owners wife which on those dates they were sole proprietor) why was these transactions on there from two yrs ago she said she did not know she did not do that maybe she voided something and it appeared. I don’t believe her I would not have know but she forgot to finish (pay and close) I think she is doing something wrong and every time they change the amount they had in profits before we (my husband) partnered with them.

    Reply
  29. Hi, we recently upgraded computers and what used to happen in QB will not happen now. Our problem is we have multiple users, Admin has set the PW and closing date. While in single user mode, he checks the box to exclude Purchase orders. But for some reason, when we sign back in, we try to change a PO, we get a prompt for the password. We have a PO from 2015 and a few from a few months ago. This box won’t stay checked. Before our new computers, it worked fine.

    Reply
    • Hi Sharie,

      I’m not quite tracking with that. Are you saying that the users that should not have access to POs are being asked for the closing date password? Which box won’t stay checked?

      Reply
  30. I am working with a small non-profit that has a part-time bookkeeper on staff that uses QB. There is also an admin that enters invoices and payments. Prior month financials keep changing due to a variety of reasons. After reading your post and all the comments, I conclude we should set up a password and close the books each month and that the bookkeeper should not have this password. Do you agree? In a small organization, who typically approves entries being made to previously closed months?

    Reply
    • Hi Julie,

      You might want to run it by your CPA or whoever audits your books or helps with your accounting controls. But yes, setting a close date, giving access to the close password to only the admin, and keeping an eye on the Audit Trail report all might help you tighten some gaps. Thanks for your question.

      Reply
  31. The issue I have with QB is the ability to change transactions from open periods. In most high functioning accounting software, the data, once posted, cannot be changed – adjusting entries have to be processed instead. Are there any accommodations in QB for this problem? Is there a way to disallow posted transactions to be modified in an open period?

    Reply
    • Hi Heather,

      Yes, you’re right. In QuickBooks, you can restrict that — the ability to change or delete existing transactions — through user permissions. Click Company / Set Up Users and Passwords… On page 9/10 (in QB Desktop Premier or Accountant 2017), you’ll see where you can allow or disallow this function, regardless of date. Thanks for your question.

      Reply
  32. We have huge problem with closing. We use QuickBooks Enterprise 2017. I close the date to March 31, 2017 to prevent users editing transactions on or before this date. When the other user tries to make bill payment on April 5 (date is April 5, 2017), QB says he cannot do it mas he does not have access to edit closed transaction. Additionally, other user in inventory department who tries to receive item using item receipt the same problem exist even though the date of their transaction is April 5, 2017.

    What going on here, programming error?

    Reply
    • Hi Jun,

      Maybe it’s because you’re entering transactions that will be linked to older transactions that are before your close date (i.e. the bill being paid was created before April 1). So you might want to change your close date to accommodate not only the new transactions, but the ones that are linked to them. Thanks for your question.

      Reply
  33. Hello Shannon,

    I hope you can assist me with the minor issue I am experiencing in QB while attempting to close out 2016. Net Income on the P&L does not agree with Net Income on the Balance Sheet, hence when running my Trial Balance, all my P&L related accounts do not agree with the P&L. What is driving this disparity and how to fix it? If you require further information, please let me know. Thank you for your time and patience.

    Respectfully,

    JP

    Reply
    • Hi JP,

      Sounds like there may be data corruption that is resulting in that discrepancy. Try making a backup, then running File / Utilities / Rebuild Data and see if that fixes it (or makes it worse). You can restore the backup if it makes things worse. Thanks for your question.

      Reply
  34. I use construction WIP by posting over/unders to BalSht and difference to sales. At the end of each period, I reverse that posting leaving a zero balance. However at End of Year I can’t do that due to conflicts with retained earnings. There has got to be a better way to reverse end of year WIP that does not change ret earnings. Please help.

    Reply
  35. We have closed the financial period, however there are Receipts that still need bills entered for them. The system isn’t allowing us to enter an invoice for the Receipts (PO’s) in the system without the password even though we are dating them for the current month and not the previous (we have also tried to leave everything and just click “bill received”). Is there a way to do this without having to enter the password in every time?

    Reply
    • Moneacca,

      If you’ve set up a closing date and a new transaction is going to effect an old (pre-close date) transaction, it will ask you for the password because it is going to make a change to the original transaction. So you’d either just have to live with that, or change the closing date to something earlier. In the case of POs, you can special case those by checking the box on the closing date window so that they are excluded from the date filter. Thanks for your question.

      Reply
  36. I am relatively new to QB. I am working with a nonprofit that has never closed its accounting records for prior years. The prior accountant for 2015 did financials and tax return for 2015 (however the accountants updates still left unreconciled bank balances – probably because bank balances also never reconciled in QB for prior years). I manually reconciled all of 2016 bank balances by adjusting for prior to 2016. I want to bring QBs in alignment with the actual bank balances and close the 2015 and move forward with 2016, as I have little hope of reconciling over 5 years of data with no records or prior personnel available. I would like to JE the difference to get QB checkbook balance and bank balance to equal. I want to close out all prior years before 2016 and move forward. What are best ways to accomplish this? Thanks for your help

    Reply

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