We are always so busy running around at year end trying to minimize taxes and making sure that we have done everything we had to do that we often overlook a very important item when the new year rolls around – Closing QuickBooks so no one can post to the prior year.
It is not uncommon for us to get a company’s QuickBooks file only to find that the opening balances for the current year (for example 2011 opening balance sheet does not agree with their ending 2010 balance sheet) have changed because they voided an old check or mistakenly keypunched the prior year date on an invoice or check when they created it. This misposting is especially common in January as everyone is getting used to using the New Year (2012 instead of 2011). This can be an expensive mistake. It could take as much as an hour of your CPA’s time trying to find why your numbers do not agree. You do not want to change any numbers once you have provided information to your accountant to prepare your tax return. There is a solution to this problem.
You can set a closing date in QuickBooks which prevents unauthorized prior period entries. You still have the ability to post journal entries to the prior year once you set up a password. To set up a closing date do the following:
Click Company – at the top of your QuickBooks screen
Choose – set closing date
Click the box – set date/password
Choose a closing date – i.e. 12/30/2011
Choose a password – REMEMBER this password.
Once you set the closing date a warning will appear on your screen if you enter a date prior to the closing date. The warning will allow you to confirm or change your entry by entering your closing password.
Pursuant to requirements related to practice before the Internal Revenue Service, any tax advice contained in this communication (including any attachments) is not intended to be used, and cannot be used, for purposes of (i) avoiding penalties imposed under the United States Internal Revenue Code or (ii) promoting, marketing or recommending to another person any tax-related matter.
