QuickBooks: Use Closing Date to Protect Prior Year Data

Brian SingletonBlog, Old Site, Watch Your Wallet

You’ll likely be closing the books on 2008 soon and your records will become the basis for your tax return. It’s critical that your QuickBooks records for a given year match the corresponding tax return, so consider setting a closing date in QuickBooks so that no one inadvertently changes the supporting documents for your tax return:

  • Choose Edit, and then Preferences.
  • Choose Accounting, and then click on the Company Preferences tab. As shown in Figure 1, you can use this window to determine if a closing date has been set.
  • Click Set Date/Password, and then enter a closing date. Although optional, you should then set a password. If you set a date without a password, then the prompt shown in Figure 2 will appear when someone attempts to enter or modify a transaction dated on or before the closing date.
  • Conversely, the prompt shown in Figure 3 asks for the closing date password.

Figure 1: The Company Preferences Accounting tab displays the current closing date for your company.

Figure 2: Users can bypass this warning prompt if you don’t set a closing date password.

Figure 3: Set a closing date password to ensure that users can’t modify prior year transactions without permission.

It’s generally best to set the closing date once you’ve completed all of your year-end reconciliations, printed W-2s and 1099s, and other year-end tasks. In fact, an ideal time is when you send the books out to have your tax return prepared.

Eliminating Uncategorized Income and Expenses

Unless you set a specific preference, users can enter transactions without specifying a revenue or expense account. Such transactions appear on the Profit & Loss Statement as Uncategorized Income or Uncategorized Expenses, as shown in Figure 4.

If these items appear on your Profit & Loss Statement its an easy fix. Simply double-click on the amount, and then double-click on each of the transactions in the resulting transaction report. Assign accounts to each of the underlying transactions, and then click the Refresh button to see the effect on your report.

Fortunately you can set a preference in QuickBooks to ensure that no uncategorized transactions will ever slip through:

  • Choose Edit, and then Preferences.
  • Choose Accounting, and then click on the Company Preferences tab.
  • As shown in Figure 5, ensure that Require Accounts is checked, and then click OK to save the preference.

Figure 4: QuickBooks places transactions that don’t have account numbers into Uncategorized Income and Expenses.

Figure 5: The Require Accounts preference prevents uncategorized income and expense transactions.

Note: Setting this preference won’t clear up existing uncategorized transactions, but will prevent them from occurring in the future.