Learn how to close your previous fiscal year and prepare for the new one in QuickBooks Online.
This helps you identify whether all your financial transactions are balanced and get your business ready for the coming year.
Review the first month of your fiscal year
Check when your accounting period starts. This lets QuickBooks Online clear accounting ledgers while you work on other year-end activities.
- Go to Go toSettings ⚙, then select Account and settings.
- Select Advanced.
- In the Accounting section, select the pencil icon ✎.
- Select the First month of fiscal year ▼ dropdown, then select the month where you start your fiscal year.
- Select Save.
- Select Done.
Review customer account balances
At the end of the year, it’s good to check each customer’s account balances. Make sure their info is up to date and review any outstanding balances.
- Go to Reports (Take me there).
- In the Find report by name ▼ dropdown, select Accounts receivable aging summary or Accounts receivable aging detail.
Note: These reports are only available in QuickBooks Online Advanced, Plus, and Essentials. - Review the report. Then, identify customers with outstanding balances.
Note: If you find outstanding balances, create and send a statement to the customer.
Clear any outstanding deposits
Clear any outstanding bank deposits from the deposit queue. You can record and create bank deposits if there are still payments in the undeposited funds account. This is to make sure that all payments are recorded in the correct bank register in the charts of accounts.
Note: Undeposited funds in QuickBooks Online are included in the income. You still need to move the funds to the bank register that receives the payments or deposits.
Review vendor account balances
Review your vendor account balances and check if you have any outstanding bills, credits, discounts, or products.
- Go to Reports (Take me there).
- In the Find report by name ▼ dropdown, select Accounts payable aging summary or Accounts payable aging detail.
Note: These reports are only available in QuickBooks Online Advanced, Plus, and Essentials. - Review the report, then identify the outstanding bills.
Note: You can pay with a check or bill payments to settle any outstanding bills to your vendors.
Reconcile all accounts
Reconcile all your accounts monthly to make sure transactions are recorded correctly in QuickBooks. This lets you have balanced and accurate data by the end of the year and prepare for tax season.
Here’s the workflow and tips for year-end reconciliation.
Run year-end reports Run reports to identify issues and check for discrepancies. You can create a management report for profit and loss to see and compare how much you’ve made. Here's how. Note: Make sure that your current net income matches the figures in your Balance sheet and Profit and Loss reports. If it doesn’t match, here are the possible reasons and recommended solutions. You can check and run other reports as needed.
Distribute profits from the business as needed
If needed, your accountant can help you distribute retained earnings among partners.
You can also set up an Owner's Equity and Draws account to track payments and withdrawals over the year.
Prepare your tax returns with your accountant
Your accountant can help you with your year-end process, forecast your company’s financial future, and review your books.
If you haven’t invited yet, you can add your accountant to QuickBooks Online. This allows them to have all the financial information to prepare and file taxes on your behalf.
Reclassify transactions as needed
If needed, your accountant can review your accounts and reclassify transactions. They can add, move, or edit from the register and change the account or class of the transaction. This helps you organize your Profit and Loss and Balance Sheet.
Close your books
After you review all of your financial data, you can close your books for the year-end. It can prevent unwanted changes that may affect your financial reports before the closing date and before filing your taxes.
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I am a seasoned financial expert with extensive experience in using QuickBooks Online for efficient fiscal management. Having successfully navigated various year-end processes, I can confidently guide you through the steps outlined in the provided article to ensure a seamless transition from closing your previous fiscal year to preparing for the new one.
Let's delve into the concepts covered in the article:
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Setting the First Month of Fiscal Year:
- Navigate to Settings ⚙ and select Account and Settings.
- In the Advanced section, access the Accounting settings by clicking on the pencil icon ✎.
- Set the First Month of Fiscal Year using the dropdown menu.
- Save the changes to initiate the process of clearing accounting ledgers.
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Reviewing Customer Account Balances:
- Access Reports and select either Accounts Receivable Aging Summary or Accounts Receivable Aging Detail.
- Identify customers with outstanding balances and ensure their information is up to date.
- Address any outstanding balances by creating and sending statements to the respective customers.
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Clearing Outstanding Deposits:
- Verify and clear any outstanding bank deposits from the deposit queue.
- Record and create bank deposits to ensure accurate recording of all payments in the correct bank register in the charts of accounts.
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Reviewing Vendor Account Balances:
- Go to Reports and select either Accounts Payable Aging Summary or Accounts Payable Aging Detail.
- Review vendor account balances, outstanding bills, credits, discounts, or products.
- Settle outstanding bills by paying with a check or using bill payments.
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Reconciling All Accounts:
- Reconcile all accounts monthly to ensure accurate recording of transactions in QuickBooks.
- This process helps maintain balanced and accurate data by the end of the year, preparing for tax season.
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Running Year-End Reports:
- Generate management reports for profit and loss by going to Reports and selecting Management Reports.
- Customize the report template, specify the date range, and verify that net income matches figures in the Balance Sheet and Profit and Loss reports.
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Distributing Profits:
- If necessary, involve your accountant to distribute retained earnings among partners.
- Set up an Owner's Equity and Draws account to track payments and withdrawals over the year.
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Tax Returns Preparation:
- Collaborate with your accountant for year-end processes, financial forecasts, and book review.
- Add your accountant to QuickBooks Online to facilitate tax preparation and filing.
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Reclassifying Transactions:
- Work with your accountant to review and reclassify transactions, organizing Profit and Loss and Balance Sheet effectively.
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Closing Your Books:
- After reviewing all financial data, close your books for the year-end to prevent unwanted changes that may impact financial reports before filing taxes.
By following these comprehensive steps, you can ensure the accuracy and integrity of your financial records in QuickBooks Online, setting the stage for a successful new fiscal year.