QuickBooks, unlike many other accounting software, does not have a function to “close the books” at year end. Prior periods remain open and are available to run reports going back to, in many cases, when you started using QuickBooks for the first time. This is a great feature for having information and data at your fingertips, but maybe not so great when you type in a prior year for a transaction date and don’t realize it.
Many times when we are working with our client’s files in QuickBooks for a compilation, review or audit at year-end, we find that an entry has been inadvertently posted into a prior period or year. You may not even realize that this has happened, as the prior year’s income is adjusted by QuickBooks, and closed to your Retained Earnings. A great feature of QuickBooks is that you can set a “closing password” for prior years. This doesn’t mean that you can’t post or modify a transaction in a prior year – just that you will be reminded that you are posting into a prior year and asked to enter a password. So maybe once you have your year-end financials set and tax return prepared and filed, you would like to set this password. In most versions of QuickBooks you would click Edit/Preferences, and then select the Accounting preference, and then the Company preferences tab. Click the button called Set Date/Password – and just enter your date and password as prompted. If you are using estimates, sales orders or purchase orders within QuickBooks, there is an option to exclude those from the closing date and password.
For more information on ways to utilize QuickBooks efficiently, contact the BSST team at Holbrook & Manter.