You are ready to provide your books to your tax professional and have your business tax returns prepared. You want to know what you need to do in your QuickBooks (QBO) file to finalize the year.
It is important to review your data for the year for accuracy. But there is another step that you may not be aware of that you need to do.
You need to close your books.
Closing your books is a very important step that you want to be sure and do. This will ensure that your data does not change and that your reports will agree with your tax return. Setting the close date in your QuickBooks QBO file is very simple.
Review your data for the year
You will want to review your data in your QBO file for the year to make sure that everything is accurate and complete. You should do this before you provide reports or grant access to your QBO file to your tax professional.
Reviewing your data includes:
- Entering all outstanding invoices, expenses, and payments
- Reconciling all bank and credit card accounts through the last day of the fiscal year
- Reviewing all Balance Sheet account balances for the year
- Reviewing all Profit & Loss account transactions for the year
How to close your books in QBO
Closing your books in QBO is not complicated. Only a master or company admin user has the permission to close the books in QBO.
Here are the steps:
- Go to Settings ⚙ and then select Accounts and Settings.
- Select the Advanced tab.
- Select Edit ✎ in the Accounting section.
- Select the Close the books checkbox.
- Enter the closing date.
- Our recommendation is to select the Allow changes after viewing a warning and entering a password option from the drop-down menu so that a password is required before editing your closed books.
There are transactions that can and should be entered in your books after you have set the closing date. These could include any Adjusting Journal Entries provided by your tax professional such as for depreciation or other adjustments they have determined are needed.
Why you should close your books in QBO
Closing your books will prevent unwanted changes to your accounting data. This is such an important step! It is just too easy for you to accidentally change something that affects a prior period.
One of the first things we do when working with a new client is to reconcile their books to the prior year’s tax return. Most times we find the numbers on the tax return do not agree with the numbers in the business’ QBO file. We also find that the closing date has never been set or has not been updated for many years. In most cases, these two problems are related.
You do not have to do this on your own. Reviewing for year-end and closing the books is included in our ongoing bookkeeping services. Read more about our services to find out how we can help.