Do I need to create an income summary / closing account in QBO?

Hello Giovann_G,

As usual my old school accounting experience gets in the way of modern accounting software like QBO. 

I really appreciate your assistance. The included links are awesome resources I'm sure I'll utilize many times over. Thanks so much for your time, and have a great day.

How does QBO determine which account to automatically close the net income to and is there a way to change this? 

Thank you

Hi there, cmsobo31.

Thanks for joining this conversation. Allow me to jump in and share information about closing your books in QuickBooks Online (QBO).

As mentioned by my colleague above, QBO won't automatically close the account unless you set up the closing date in the Account and Settings.

Closing your books ensures your financial data stays the way you want it to. It also prevents any accidental changes that could affect your financial reports. This locks your books so no one can edit your accounting data prior to the closing date.

I'll add these articles that tackle year-end guide and closing books in QBO for more information:

• Year-end guide for QuickBooks Online.
• Close your books in QuickBooks Online.

I also recommend visiting our website for more tips and other resources you can use in the future: Self-help articles.

Please let know if you have follow-up questions about closing books or anything else by leaving a comment below. I'm always here to help. Take care.

I inherited a QBO file from another accountant and it was already set up to close. The fiscal year net income is posting to the Owner Capital account of a C-Corporation. This Owner Capital account name shows on the Balance Sheet but not the balance of the net income, it always shows a $0.00 balance. The previous accountant would then do a journal entry to move this "hidden" balance from Owner Capital to the Retained Earnings account. I can't find how to get the net income to post to Retained Earnings instead of Owner Capital. I didn't see this information jumping out at me in the info links you provided nor was I able to find the answer by searching the Help within QBO.

Hello there, @cmsobo31. I'm chiming in to share some details about amounts posted in the incorrect account in QuickBooks Online (QBO).

Ideally, QuickBooks Online automatically adds the net income from the previous fiscal year to your Balance Sheet as Retained Earnings. However, know that you can't just select Retained Earnings from your Balance Sheet to view the details. The Retained Earnings account is a rollover of all previous fiscal years' net profit (or loss). QBO also automatically and electronically swaps funds from your net income or loss into the account and doesn't record any visible transactions of it.

To determine which accounts QBO will add the retained earnings, you can consider running a profit and loss report. I'll input the steps below so you can proceed. To begin, here's how:

1. Go to Business overview then select Reports (Take me there), or go to Reports (Take me there).
2. Locate and select the Profit and Loss report.
3. From the Report period dropdown list, select All Dates.
4. Select Run report.
5. Select the Net Income amount to open the Profit and Loss Detail report for All Dates.

Visit this article for more information about Retained Earnings account details: How to view Retained Earnings account details.

Additionally, if you want to create an adjustment, you can do a journal entry. But know that it's not necessary since QBO does it automatically and accurately.

I've also got you this article to help you close your books in QBO: Close your books in QuickBooks Online.

You can also check this page to learn more about reconciling an account in QBO: Reconcile an account in QuickBooks Online.

Our door is open 24/7 in case you have any additional QuickBooks-related concerns, @cmsobo31. We'll be more than happy to help you out once again. Take care, and have a good one!

Thank you very much for the information. All of this makes sense as the way it should be happening and the way I am used to seeing things. In this particular case, the net income is not closing to Retained Earnings, it is closing to a different account - Owners Equity. I am trying to find out if there is a way to fix this so that when the books are closed, the net income goes into the proper account. Again, I inherited this file from another accountant so I'm not sure what they may have done to set it up this way.

Hello there, @cmsobo31.

Let's pull up the Profit and Loss and Balance Sheet reports so you can verify that the net income goes into the proper account when closing books in QuickBooks Online (QBO).

When the fiscal year ends, it's not until the first day/date of the new one that QuickBooks moves your net income to the Retained Earnings account. Once you're seeing the net income assigned to the Owners Equity account before the fiscal year-end date or on the last day, then that should be correct. 

To check this, you'll have to compare the Profit and Loss and Balance Sheet reports. You can start by running the Profit and Loss report for this fiscal year in question and see the Net Income value at the very bottom. You should see this same value in net income contributing to Equity.

Next, run the Balance Sheet report (the same date as the Profit and Loss), and you'll see that the net income shows in the Equity account. Not in Retained Earnings, but still part of Equity.

Once you're done, change the Balance Sheet report date to the first day of the new fiscal year. It should be one date later than the Profit and Loss. The net income should be assigned to the Retained Earnings account, and you'll see it holding the value.

When everything is all set, you may also want to check out this article as your reference in closing your books and preventing changes to the past transactions in QBO: Close your books in QuickBooks Online. 

Please don't hesitate to keep me posted in the comments if you have other concerns about closing books and managing accounts in QBO. I'm always ready to help. Take care, and I wish you continued success, @cmsobo31.