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Frequent Contributor **

What to do at the end of the year

I use QuickBooks 2013 on my MAC.  I am a small LLC contracting company, I started November 2012.

When the end of last year came around I asked whether I should do anything in QuickBooks to start up the new year and a few people said that I didn't need to do anything at all.

After reading around a little, I saw other people mentioning that certain things should in fact be done to start the new year.  I am wondering what those things are, what should I do to separate each year. 

I have QuickBooks setup pretty simple.  I have a checking account that I deposit my job income into, I have a credit card that I make purchases with and then pay off with the checking account.  

I have an Owners Equity Account that I deposit (or make purchases with) personal money into when necessary.  As a sub account of the Owners Equity account I have an Owners Draw account that I draw money out of when there is some extra (not too often yet lol).

So how does that sound?  Am I doing it correctly?  And if so, what exactly do I do at the end of the year and why did people say that I didn't have to do anything?

Thanks a lot!


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Best answer 12-10-2018

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Established Community Backer ***

@ electricalcont At the start of the new year QB closes...

@ electricalcont

At the start of the new year QB closes all expense and income accounts to retained earnings unless you are set up in QB as a sole-P, then they close to owner equity

that is the aspect that people were talking about that you do not have to do anything

Owners draw, and owners investment (if you have that), and retained earnings, should also be closed to owner equity at the start of the year.  That way during the year you can easily see what you have taken or invested in the business.  You do that with a journal entry

clear owners draw
debit owner equity and credit owner draw

I have a step by step targeted tutorial on this, see this posting if you are interested
http://onsale-apparel.com/Rustler/my-tutorials

I recommend you never use condense data in the utilities menu, too often there are problem issues that crop up.  If your file gets so big that it is slowing down, a period copy can be made by anyone with the accountants version. A period copy basically creates a new file as of a certain date that you use going forward, and the old file is retained separately for audit purposes

There are also a pair of third party utilities that will make the period copy if you can not find someone with an accountants version who do it




5 Comments
Established Community Backer ***

@ electricalcont At the start of the new year QB closes...

@ electricalcont

At the start of the new year QB closes all expense and income accounts to retained earnings unless you are set up in QB as a sole-P, then they close to owner equity

that is the aspect that people were talking about that you do not have to do anything

Owners draw, and owners investment (if you have that), and retained earnings, should also be closed to owner equity at the start of the year.  That way during the year you can easily see what you have taken or invested in the business.  You do that with a journal entry

clear owners draw
debit owner equity and credit owner draw

I have a step by step targeted tutorial on this, see this posting if you are interested
http://onsale-apparel.com/Rustler/my-tutorials

I recommend you never use condense data in the utilities menu, too often there are problem issues that crop up.  If your file gets so big that it is slowing down, a period copy can be made by anyone with the accountants version. A period copy basically creates a new file as of a certain date that you use going forward, and the old file is retained separately for audit purposes

There are also a pair of third party utilities that will make the period copy if you can not find someone with an accountants version who do it




Frequent Contributor **

Thanks for both of your replies. Quick question, what ha...

Thanks for both of your replies.

Quick question, what happens if I don't clear owners draw and debit owner equity and credit owner draw?  I didn't do it last year, what if I don't do it this year too?  What happens?

FWIW, my accountant doesn't use the MAC version of QuickBooks so last year I just printed out a bunch of different reports and stuff to give him, which he said was fine.
Established Community Backer ***

Nothing, it is fine to leave it.  I prefer to clear it ea...

Nothing, it is fine to leave it.  I prefer to clear it each year so that during the year I can see what i have taken or put in.
you can wait until the start of next year, at this point in the year and since you aren't using it for info like I do, no big deal
Frequent Contributor **

OK, so I had someone walk me thru it.  I'd appreciate som...

OK, so I had someone walk me thru it.  I'd appreciate someone going over what we did just as confirmation.  

First we changed my chart of accounts.  I had an Owners Equity account with an Owners Draw account as a sub of it.  He had me change the Owners Equity to Owners Investment and then had me make a brand new Owners Equity account.  He then made both the Owners Investment and Owners Draw sub accounts of the new Owners equity.  Does that sound right?

Then we did 3 things:

We found the Retained Earnings on 1-1-13 and made a journal entry to put that amount into Owners EquitySmiley Surprisedwners Investment.  That cleared up last year's Retained Earnings.

We then found the Retained Earnings on 1-1-14 and made a journal entry to put that amount into Owners EquitySmiley Surprisedwners Investment as well.

We then took the amount of the Owners EquitySmiley Surprisedwners Draw and made a journal entry for 12-31-13 to put that amount into Owners EquitySmiley Surprisedwners Investment.

All sound correct?
Not applicable

The biggest thing to do, especially since this year is mo...

The biggest thing to do, especially since this year is mostly through and your tax returns should be done by now, is to set the Closing Date. This will keep the data from being changed for those prior filed dates.
It should also be whn to reconcile all the balance sheet accounts so that transactions are marked cleared. This will be necesary if you ever need to condense your data file in the future.
Each year is already seperated by the date of each transaction. An Annual backup should be made once evrything has been entered for the prior year.