What are Quickbooks Closing Entries and How Do Them?

QuickBooks is a well-known accounting software used to manage and balance the entries of financial data, and this software is suitable for small and medium businesses (SMBs). It offers several accounting services such as Quickbooks online essentials, real-time payments, QuickBooks payroll support, inventory management, invoices, etc.

All your data in QuickBooks stays for a long time and in compressed form. Additionally, if your closing entries are not correct, or you have missed them, the software sends you notifications about updating them. If you are worried about Quickbooks closing entries at the end of the fiscal year, then you need to read this blog. You don’t have to worry about closing the books as the QB software makes automatic adjustments in preparation for the coming financial year.

In this blog, I will share several steps by which you can easily close your entries in QuickBooks accounting software.

What are Quickbooks Closing Entries and their Need?

To manage accurate accounts, it is important to close books at the closing of the financial year. In this software, there is no fixed closing of entries at the end of each month. However, it is important to make a closing entry in QB at the end of each financial year. The QuickBooks Closing entries are entries made to transfer the balances from income and expenditure accounts to maintain earnings at the end of the financial year.

They are an essential part of the accounting cycle as they allow businesses to create financial statements and file tax returns efficiently every month and year. Once the QB is closed, you do not make any entries or changes for that financial year.

Need of the Quickbooks Closing Entries:

Reconciliation of the accounts is known as Quickbooks closing entries. The main reason to track the transaction is to know the profit and loss of the business.

Steps for Closing Entries in QuickBooks Software

Here are some steps for Quickbooks closing entries:

Step 1 – Check your Accounts

Reviewing your account’s financial data from the past year is an important step.

First, open your Intuit QuickBooks software.
Then log in to the software as a company or primary admin.
Now, verify your accounts and ensure everything is in order.
After this, you can enter outstanding invoices, expenses, and payments.
You will need to reconcile your accounts by the closing date.
Lastly, you can verify your items in the inventory.

Step 2 – Close your Books in QB Software

Before you close your books, make sure everything is as you want them. If you find any mistakes, this step will help you rule out any accidental changes that may be affecting your financial reports.

First, go to the ‘Settings’ tab.
Then you can choose ‘Accounts and Settings’.
Now, click on the ‘Advanced’ tab.
After this, go to the ‘Accounting Section’ and click the ‘Edit’ option.
Now, turn on the ‘Close Your Books’ switch and then enter a closing date that provides you with a comfortable deadline.
You should not need to edit any transactions before this date. After this point, your new bookkeeping work will begin.
If you want to obtain a password before editing your closed books, from the drop-down menu choose the ‘Allow changes after viewing a warning and entering a password’ tab.
In the final step, choose the ‘Save’ option and then click on ‘Done’.

How to Delete Quickbooks Closing Entries

Here is the list of some steps that are related to removing closing entries in QB.

Step 1: First, you need to locate the Revenue Accounts under the Trial Balance and include the revenue and capital accounts in your company’s ledger. You will now be directed to the Credit Balance shown here, and you will need to make some debit entries for each revenue account to change it to zero. Once the process is done, the credit balance will automatically move to the Income Summary Account.

Step 2: Now, you can generate an Expense Account with a total of zero. You have to look at the ‘Expense Accounts’ under Trial Balance where you will find the debit amount and the particular Income Summary Account, and make a credit entry for each expense account.

Step 3: After this you see the credit excelling over the debit amount, known as Net Income. When you find the debit balance surpassing the credit balance, this is termed a Net Loss.

Step 4: The last step in removing closing entries in QuickBooks is to close the ‘Dividend Account’ of retained earnings. You will see that the dividend account will have a normal debit balance, and thus, the retained earnings will show the amount of net income that was initially paid.

To Correct Closing Data Mistakes in Quickbooks

In Accounting books, Accuracy directly depends on how correctly you mentioned the date. To rectify the problem, follow these steps:

First, set the closing date and password in the company preferences section to find the previous year’s information by filling in the password. Proceed when you sign in:
Select the “Edit” button.
To view the closing date go to the preferences.
Under the Accounting preferences button click Company preferences.
Enter the Date and password in the given field.

Key Points to remember about Quickbooks year-end Closing Entries

Some information that needs to be known:

Ensure that closing entries are made after you record all your adjusting entries.
Quickbooks desktop permits to entry of transactions that affect the balance of the fiscal year.
Qb desktop doesn’t have real transactions for closing entries it automatically creates. When you run a report the program starts doing adjustments.
The font size of the transaction is very tiny and you are not able to zoom out transactions. These adjustments are referred to as Closing entries which are not transactions in real in Quickbooks.

Conclusion

In this blog, I have listed all the steps one by one which will help you to know about QuickBooks closing entries. People can read this blog to close the dividend account of retained earnings.

If one is facing problems with closing entries in QuickBooks and is irritated with issues, one needs to read this helpful guide that assists you in closing entries in the QuickBooks accounting application.