At every end of the year, aka your Fiscal Year, closing entries is one of the fundamental actions to execute that enables you to effectively manage your accounts and get started for the upcoming year too.
Associated with this, the transfer of income and expense accounts to the retained earnings accounts is also important. Being one of the biggest assets for managing all financial tasks of your business, QuickBooks helps you with closing entries.
What are Closing Entries in QuickBooks?
The practice of closing entries at the end of your Fiscal year is essential to maintain the healthy financial status of your business. In QuickBooks, your yearly entry closure activity gets even easier and does not come with the threat of missing out on data.
This data is prevalent for a very long time and is not deleted until you decided to Condense the same. Topping with an additional benefit, QuickBooks sends you notification of updating and amending your closing entries if not done properly or missed out.
This blog will help you to have a detailed look into how to perform the closing entries activity on QuickBooks.
Why Closing Entries in QuickBooks is Important?
As simply defined, closing entries stands for reconciling the accounts of your company. The main purpose of why you need to look into your closing entries is to understand the reflections in terms of revenue increase of the previous year on your company’s retained earning account.
Along with showing revenue, the closing entries also help you to see the lessened dividend expenses and payment.
Going further, this article will help you to map detailed steps on how to delete closing entries in QuickBooks?
How to Delete Closing Entries in QuickBooks?
This section would help you add the vital steps involved in deleting closing entries in QuickBooks:
Step 1: Move Credit Balance to the Income summary Account
The first step for beginning to close entries in QuickBooks is to locate the Revenue Accounts under the Trial Balance which will have the revenue and capital accounts placed in the ledger of your company.
You will be able to see a ‘credit balance‘ that is reflecting here and you would be needing to zero that out by making a ‘debit entry‘ for each of the revenue accounts.
Following this action, the credit balance shall move to the Income summary account.
Step 2: Make Expense Account Total Zero
In the next step, you need to spot the ‘Expense Accounts’ under the Trial Balance where you will find a debit balance. Perform a Credit entry for every ‘Expense account’ in the respective income summary account.
This will make the Expense account total to be Zero.
Step 3: Credit Entry Amount Exceeding the Debit Amount
Now, if there is a situation in which the Income Summary Account would show a credit balance even after finishing the entries, or you see a Credit Entry amount exceeding the debit amount, this is termed as Net Income.
Meanwhile, if you find the debit balance exceeding the credits, then it would be termed as a Net Loss.
Step 4: Close the ‘Dividend Account’
The final step to deleting closing entries in QuickBooks is to close the ‘Dividend Account’ to that of the ‘retained earnings. You would be noticing that the Dividend account shall be having a usual debit balance and thus, the retained earnings will reflect the amount of Net income which was initially given to it.
So, now pledge to yourself to perform the closing entries action in QuickBooks. If you wish to have more details further to the above-mentioned steps or want to get clarified on your other queries.
Need Some one on one QuickBooks Assistance?
Can I rectify the ‘Closing Date mistake in QuickBooks?’
Yes, you can rectify the closing date mistake in QuickBooks. To rectify the closing date mistake in QuickBooks, you would be needing to perform the following steps:
Tap on Edit.
Visit Preferences which will help you to see the closing date option.
Choose Company Preferences under the Accounting Preferences.
Enter the Date and Password which is being selected.
Are there any specific types of reports that can help me with QuickBooks Closing Entry Mistake?
Yes, there are certain types of reports which can assist you in rectifying or avoiding the QuickBooks Closing Entry Mistake. These are:
Audit Trail report.
Closing Date exception report.
Deleted Transactions Report.
Retained Earnings Quick Report.
What can be some of the guiding ways to plan for the upcoming year?
To effectively plan for the upcoming year and have a streamlined process in place, you can try out the below-mentioned ways:
Leveraging the Cash Flow Projector.
Using the Business Plan Tool.
Creating a specific Budget.