If this happens, this can change your income from the previous period, which throws off the balance in retained earnings. Anyone with access to your QuickBooks file can go in and change something in the previous month or year, and you might not find out until it’s time for your CPA to prepare your tax return. This is just a bookkeeping reset for the next year. So it looks like your books are closed, but this isn’t a formal close process. When you set the year-end in Intuit QuickBooks, the program automatically zeroes out all the income and expense accounts and transfers the balance of net income to Retained Earnings when your fiscal year ends. This is done by closing the books: the balances in your income and expense accounts are transferred to retained earnings over on the balance sheet. This means the balances in your income statement accounts need to be zeroed out so the next period can start out fresh. Your income statement accounts track what happens during a specific period. What Does Closing the Books Mean in QuickBooks? To use your financials as an effective planning and strategic tool, you need to get into a regular cadence of closing your books. It’s understandable: Most small business owners are focused on running their businesses. Surprisingly, however, very few small businesses perform a formal month-end close in their accounting software. They help business owners measure progress towards goals, and they’re essential for performing an accurate cash flow projection for the future. Complete and timely financial statements are the most powerful strategic tool for any organization.
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