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Protecting Account Balances

One of the frustrations accountants and bookkeepers encounter when working with QuickBooks clients is the issue of protecting account balances. This is a headache for the client as well, whether they know it or not.

Certain events cause this to be more important.

Financial statements have been submitted to third parties like a bank
Income tax returns have been filed based on the QuickBooks information
Other governmental returns have been based on the QuickBooks data

Once these things happen, the numbers in QuickBooks must continue to reflect those same balances. What if net income on your income tax return is $50,000, but now in an audit your QuickBooks files shows that it was $75,000?

This happens in a number of different ways. A check from last year is voided. QuickBooks voids the check by changing the amount to zero. The date stays the same.

An invoice is deleted because that customer is broke and will never pay it. If it is from a previous period, those numbers have now been impacted.

Clearly there are ways to do these things without creating errors in the QuickBooks file. Things like creating a credit memo for a customer in the current period rather than deleting the invoice in a previous one.

Still, though, there is the danger of forgetting and accidentally changing something that should not be changed. To guard against this, QuickBooks created the Closing Date feature.

Navigate to Edit->Preferences->Accounting->Company Preferences. Here is where the closing date can be set. See the highlighted portion of the preference window above.

In this sample file, the closing date has not been set. Clicking the Set Date/Password will allow you to do that. You can set just a closing date, or a closing date and password.

As an illustration, let’s set the closing date in this sample file to 11/30/2018.

Note there is a checkbox above the Closing Date field. It allows forms like estimates and purchase orders to be unaffected by the closing date.

Since these types of transactions are non-posting, they can be edited anytime. It will have no affect on account balances.

If we try to edit a transaction dated before the closing date, QuickBooks displays this message:

It’s a help, but not strong enough for many QuickBooks users. While issuing a warning, QuickBooks will still allow the edit.

The feature is strengthened considerably by setting a password when creating the closing date. When editing the same transaction and a password has been set, the following message appears: