closing date

What Is the Closing Date and How Do I Set It?

Chief Mechanic · September 6, 2010 ·

The Closing Date in QuickBooks is a setting that indicates the date through which your books have been closed. Normally, books are considered closed after they’ve been reviewed, all adjusting entries have been made, and reporting has been completed to investors, lenders, or tax authorities.

It’s used to protect data from inadvertent modification by making it more difficult – but not impossible – for you to change or delete transactions on or before the closing date. Unlike other accounting systems that require you to close your books and make it impossible to add, change, or delete transactions in closed periods, QuickBooks offers the flexibility for you to restrict access to periods you or your accountant have determined are closed and to later remove that access restriction, a process commonly called “re-opening your books.”

It’s important to understand that setting a Closing Date doesn’t result in recording any transactions; QuickBooks automatically makes certain adjustments, such as increasing your Retained Earnings account by the amount of your prior year’s net income on the first day of your fiscal year. The Closing Date is only an access restriction. You can control how strict that restriction is by whether you set a Closing Date Password.

To set the Closing Date, click on the Accounting sub-menu of Edit->Preferences… menu selection and choose the Company Preferences tab. You’ll see the current Closing Date, if any.

QuickBooks Premier 2009 Preferences Closing Date

Click on the Set Date/Password button to view the Set Closing Date and Password window.

QuickBooks Premier 2009 Preferences Set Closing Date

Like many functions in QuickBooks, there are multiple ways to get to this same point. The Company->Set Closing Date… menu choice will take you to the window to make this setting. You can also click on the Company->Set Up Users and Passwords->Set Up Users… menu selection, followed by clicking on the Closing Date… button.

QuickBooks Premier 2009 User List Closing Date

With either method, you’ll end up at the the Set Closing Date and Password window.

You can set or change your Closing Date and the Closing Date Password on this window. If you attempt to enter any transaction with a date on or before the Closing Date, QuickBooks will display either a warning or a confirmation window, depending on whether you set a Closing Date Password. If you set a Closing Date Password, you’ll have to first correctly enter it to record the transaction.

Here’s the warning you’ll see when attempting to record a transaction dated on or before the Closing Date if you do not enter a Closing Date Password:

QuickBooks Premier 2009 Closing Date Warning

You’ll still be able to record the transaction by clicking Yes. The access restriction is simply forcing an extra step.

Here’s the more strict limitation you’ll see when attempting to record a transaction dated on or before the Closing Date if you do enter a password:

QuickBooks Premier 2009 Closing Date Password

You’ll have to correctly enter the password to record the transaction, so the access restriction is greater.

Since only the QuickBooks Administrator or a user with External Accountant privileges can set QuickBooks preferences, it’s not possible for users without those higher privileges to first remove the Closing Date or change the Closing Date Password to bypass the access restriction. That insures that, when combined with user restrictions, the Closing Date restrictions are effective.

(+3 rating, 3 votes)

How Do I Clear the Closing Date or Re-Open My Books?

Chief Mechanic · September 6, 2010 ·

Since the Closing Date is only an access restriction, sometimes you may find a need to clear or remove the Closing Date to permit you to record prior period transactions. Typically, this isn’t done to record a small number of transactions, because those transactions can be recorded by over-riding a warning or correctly entering the Closing Date Password. It’s done when it’s later discovered that a sufficiently large number of prior period transactions need to be recorded, and the access restriction slows this process unnecessarily. Removing the access restriction after you’ve previously set it is a process commonly called “re-opening your books.” For example, you may need to re-open your books to prepare an amended tax return.

To clear or remove the Closing Date, click on the Accounting sub-menu of Edit->Preferences… menu selection and choose the Company Preferences tab. You’ll see the current Closing Date.

Click on the Set Date/Password button to view the Set Closing Date and Password window.

Simply delete the date in the Closing Date field and click Ok.

(+6 rating, 6 votes)

What Is the Closing Date Exception Report and How Do I Create It?

Chief Mechanic · September 6, 2010 ·

The Closing Date Exception Report in QuickBooks shows all transactions sorted by transaction type (e. g., Bill, Check, Invoice) dated on or before the Closing Date that were first recorded or modified after that date was established. To add to its utility as an audit tool, it also includes the User Name of the user that recorded the transaction in the Last modified by column.

To produce this report, click on the Reports->Accountant & Taxes->Closing Date Exception Report menu selection. Here’s a sample of the report:

QuickBooks Premier 2009 Closing Date Exception Report

The report begins with the changes to the Closing Date itself, followed by a list of transactions sorted by transaction type. To change the settings for the Closing Date Exception Report, click the Modify Report… button:

QuickBooks Premier 2009 Closing Date Exception Report Display Tab

The Report Date Range refers to the transaction date itself. As shown above, the report will include all applicable transactions dated up to and on the Closing Date. The From field is blank because this setting looks backward to include all transactions.

The Days Entered / Last Modified refers to the actual date on which you performed this accounting task. The To field is blank because this setting looks forward to include all transactions added or modified after the Closing Date.

By default, Show Deleted Transactions is checked, but you can uncheck this setting to exclude deleted transactions from the report.

Because changes to prior periods after they’ve been closed must be done with extreme care, this report is primarily an audit trail to quickly identify what transactions were recorded and by whom.

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How Does Quickbooks Handle Voiding a Check Dated In a Closed Period?

Chief Mechanic · August 30, 2010 ·

When you void a check, QuickBooks:

changes the original amount of the check to 0.00
adds the text VOID: to the beginning of the Memo
sets the cleared flag, Clr

When you’ve specified that your books are closed through a given date, in addition to performing the above steps, QuickBooks gives you the option of automatically adding reversing general journal entries so that accounting reports for the closed period are not affected. However, this option to automatically add a reversing general journal entry comes with a big stipulation: the accounts associated with the check must be expense accounts. If they’re other account types, you’ll have to construct reversing general journal entries on your own.

A bill payment check is similar to a check, but it is actually a different transaction type. QuickBooks only provides the option to automatically reverse voided checks, not bill payment checks. Later in this article, we’ll describe how to manually make the reversing general journal entries when voiding a bill payment check from a closed period.

To see this process in action, first verify your Closing Date. You can find it by clicking on the Company->Set Closing Date… menu selection.

QuickBooks Enterprise Solutions 10 Closing Date

For our sample company, the Closing Date has been set to 11/30/2013. If you void any check dated on or before this date, QuickBooks will give you the option of automatically creating well-documented reversing general journal entries that will maintain the accuracy of your accounting reports for the closed period.

To void a check, you can either right click on the check in the bank account register to invoke the context menu and select Void Check or you can select the check in the register and choose Void Check from the Edit menu. Both paths take you to the same destination.

QuickBooks Enterprise Solutions 10 Void Check

Since check # 5244 is dated before the Closing Date, voiding it will bring up this warning:

QuickBooks Enterprise Solutions 10 Void Old Check Warning

You have the option of simply voiding the check and not having QuickBooks create the reversing general journal entries. Just click the No, just void the check button. However, unless you manually create reversing general journal entries, financial reports from the closed period will no longer be accurate, since the check amount was just changed to 0.00. Even if you intend to modify the reversing general journal entries (such as to add more information to the Memo), it’s a good idea to click the Yes (Recommended) button.

Clicking the Yes (Recommended) button causes QuickBooks to automatically perform these steps:

create a reconciled general journal entry on the date of the original check
create a reconciled, reversing general journal entry on the date you voided the check
add additional text to the Memo of the voided check to refer to the journal entries made

The general journal entry on the date of the original check:

QuickBooks Enterprise Solutions 10 Void Check Reversing Journal Entry 1

The reversing general journal entry on the date the check was voided:

QuickBooks Enterprise Solutions 10 Void Check Reversing Journal Entry 2

The updated memo on the voided check that refers to the general journal entries:

QuickBooks Enterprise Solutions 10 Void Check Memo

Note that QuickBooks automatically sets the Clr flag for both journal entries, just like it does for the voided check. By doing so, voiding the check and recording the reversing journal entries will not interfere with your bank reconciliation.

Recording these journal entries preserves the accuracy of your financial statements for the closed period. If you simply voided the check and didn’t record these entries, rent expense for the closed period would be lower than previously reported on your financial statements or tax returns. That inconsistency can lead to questions about the reliability of accounting information and cause time to be spent trying to reconcile the difference. Well-documented general journal entries eliminate the potential for inconsistency.

The reversing general journal entry puts a credit to rent expense in the current period. If you were voiding the original check because it was never cashed and you now plan to issue a replacement, the credit and the replacement check will offset. That way, your expenses (or the accounts on the original check) are not overstated in the current period. If you were voiding the check and you don’t plan to reissue it, expenses for a closed period were overstated, and they’ve been adjusted in the current period – when the overstatement was discovered.

QuickBooks did a lot of work once you clicked on the Yes (Recommended) button. But don’t forget that the entire process is triggered by setting your Closing Date. If you haven’t done that, QuickBooks won’t go through these time-saving steps because it lacks the information to do so.

For bill payment checks, QuickBooks won’t automatically perform the steps described above, so you’ll have to go through them manually when voiding a bill payment check in a closed period. Those steps are:

void the bill payment check, noting the vendor; voiding the bill payment check will turn the bill into an outstanding A/P balance
record a general journal entry on the date of the original bill payment check with the first line on the journal entry as a debit to accounts payable; record the vendor in the Name column on this line; the second line of the journal entry is a credit to the bank account from which the bill payment check was written
record a general journal entry on the date the bill payment check was voided with the first line on the journal entry as a credit to accounts payable; record the vendor in the Name column on this line; the second line of the journal entry is a debit to the original bank account
use the Vendors->Pay Bills function to use the older general journal entry to pay the original bill
pay the newer general journal entry in the normal course of business

It’s important to note that the procedures described here cover voiding – but not re-issuing – a check. If you need to re-issue a check, you’ll have to do so in the current accounting period. Voiding a bill payment check leaves a current accounts payable balance for you to pay in the current period. If you want to void a bill payment check in a closed period and cancel the original bill, you’ll need to record a bill credit in addition to the steps outlined above.

(+8 rating, 16 votes)

closing date

Accounting

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