Year End FAQs: Reports & Closing the Books

It’s that time of year again! And yes, we have more year end topics to cover to make this time as smooth as possible. Today, we’re talking about closing your books and the report you’ll need to understand how your business did this year. 

Why should you close your books? Closing your books guarantees no unwanted changes are made to your account before filing your taxes. This “lock” on your books makes it so that no one can edit your accounting data before the specified closing date. This step is important to accurately view previous years financial data.

Now that I’ve shown you why, let’s look at how to close your books in QuickBooks Online.

First, take the time to review your accounts and make sure everything looks correct. What that looks like is this:

1. Enter any outstanding invoices, expenses, and payments.
2. Reconcile your accounts up to your closing date.
3. Review your inventory quantities.

I know that it looks like a lot but this isn’t something to be accomplished in one sitting. Tackle one thing at a time until you are confident everything is correct. Now you’re ready to lock it up and throw away the key! Well, not really, but you get what I mean.

1. Go to Settings and then select Accounts and Settings.
2. Select the Advanced tab.
3. Select Edit in the Accounting section.
4. Select the Close the books checkbox.
5. Enter a closing date. Note: Give yourself some wiggle room. You shouldn't need to edit any transactions before this date. Your new bookkeeping work will start after this point.

Select the Allow changes after viewing a warning and entering a password option from the drop-down menu if you want to require a password before editing your closed books.

Wasn’t that simple? We have that close date entered and can now look at the reports most helpful to you during this time. Number one is going to be the Profit and Loss report, aka your income statement. This report shows your income, expenses, and net income (profit or loss). Running this report is straightforward ( Reports>Profit and Loss) but I want to show you a way to run this report by each bank account using our Location feature. 

With Location tracking you can set up a location for each bank account and assign each transaction you enter to one of those location/bank accounts. Then, filter the Profit and Loss report by location to see each bank account's PL. We show you how to do each of these steps.

To turn on Location tracking:

1. Click on the Gear icon in the upper right-hand corner. 
2. Select Account and settings.
3. Choose Advanced.
4. In the Categories section, select Edit to open the fields.
5. Turn on Track locations.
6. Use the options in the Location label drop-down list to specify a name for the field in which you select a location. If you don't select an option, the name of the field defaults to Location.
7. Select Save, then select Done.

Once Location tracking is turned on, you can assign a location to each of your bank accounts for tracking purposes.

1. Head back over to the Gear icon.
2. Under Lists, choose All Lists.
3. On the Lists screen, select Locations.
4. Select New.
5. In the Location Information dialog, enter the bank account name in the Name field.
6. Select Save.

Now that your banks are set up, you'll see a Location field drop-down list each time you open or create an Income or Expense transaction. Choose the location you want from the list.

Note: While you can assign most transactions to locations, you can’t for payments. Payments are automatically assigned to the location you entered on the invoice when you created it. You can't specify locations for transfers.

Now the moment we all have been waiting for...time to run the report!

1. Go to Reports.
2. Locate and select the Profit and Loss report.
3. In the open Profit and Loss report, select Customize.
4. In the Customize report panel, select the Rows/Columns item to open the section.
5. From the Columns drop-down list, select Locations or a different label you chose.
6. Select Run report.

Another report to have in your back pocket this time of year is the Balance Sheet. A Balance Sheet report gives you a financial snapshot of your company as of a specific date. It calculates how much your business is worth (your business' equity) by subtracting all the money your company owes (liabilities) from everything it owns (assets): Assets - Liability = Equity. 

If you notice a discrepancy between your Balance Sheet and another report, here are some things you should know:

• Your Balance Sheet report is a cumulative report that carries a beginning balance.
• In other reports, the date range you set only applies to net income and the specific account you select within the report. (Example: If you have $50 of sales tax in March and $60 in April, the Balance Sheet will show $110 for the sales tax liability account.)
• If the date range for the report is April, it will still show the cumulative total of $110. However, if you select $110, its transaction detail report shows a beginning balance of $50 and then $60 transaction for April.
• In addition, the Sales by Item report will be limited to the date range you set. If you set the report date for April, then it will truly reflect only April and show the $60 only.

OK, let’s take a deep breath. I know there’s so much to keep track of at the end of the year, but you got this! And, as always, all of us in the Community have your back.