Close the Books in QuickBooks Online and Desktop (Year-End)

Closing the books in QuickBooks means locking a finished accounting period so no one can change it by accident. At year-end you do it after you have reconciled every account, imported any missing bank and credit card transactions, reviewed the financial statements, and made your adjusting entries. Then you set a closing date with an optional password, and QuickBooks rolls last year's net income into retained earnings. This guide covers the full year-end close for QuickBooks Online and Desktop, in order.

The single biggest thing that stalls a year-end close is transactions that never made it into QuickBooks. The live bank feed only reaches back about 90 days, so months earlier in the year are often missing. Before you close, convert each missing bank statement to a .qbo file with the tool above and import it, so the period is complete and every account can actually be reconciled. That catch-up is the same job as importing bank statements into QuickBooks for taxes, so doing it now means the return has what it needs too. You cannot close a year you have not finished recording.

A clean year-end close follows the same order every time: reconcile every account through December, bring in any transactions that are missing, run and review the financial statements, post adjusting entries, then set the closing date. Skipping straight to the closing date just locks in whatever was wrong. The questions below answer what comes up at each stage.

What does closing the books mean in QuickBooks?

Closing the books means marking an accounting period as final so its transactions are protected from edits. In QuickBooks Online you set a closing date that locks everything on or before it; in Desktop you do the same under company preferences. It does not delete anything. It signals the period is reconciled, reviewed, and filed, and stops accidental changes that would throw off a return you already submitted.

How do I close the books in QuickBooks Online?

Go to Settings, then Account and settings, then Advanced. In the Accounting section select Edit, turn on Close the books, and enter your closing date, usually December 31. Choose whether changes after that date need only a warning or a warning plus a password, then Save. With a password set, no one can alter a closed period without it.

How do I close the books in QuickBooks Desktop?

In QuickBooks Desktop go to Edit, then Preferences, then Accounting, then Company Preferences. Under Closing Date, select Set Date/Password, enter the closing date, and set a closing date password. Desktop then warns or blocks anyone trying to change a transaction dated on or before the closing date, the same protection the Online closing date provides.

When should I close the books in QuickBooks?

Close a year after the work is done, not on January 1. Wait until every account is reconciled through December, your accountant has made any adjusting and tax entries, and the return is filed or close to it. Many businesses set a tentative closing date right after reconciling, then lock it for good once the CPA signs off, so late corrections still go in cleanly.

How do I do a month-end close in QuickBooks?

A QuickBooks month-end close runs the same steps as the year-end close, just for one month. Reconcile every bank and credit card account through the last day of the month, import any transactions the feed missed, post that month's adjusting entries, and review the Profit and Loss and Balance Sheet. You can then set the closing date to the end of the month to lock it, or leave it open and rely on your monthly reconciliation as the control. Closing monthly keeps each period clean so the year-end close is fast. The full monthly routine, with the exact clicks for Online and Desktop, is in our QuickBooks month end close checklist.

What is the difference between a month-end and a year-end close?

A month-end close locks one month after you reconcile and review it, and you repeat it twelve times a year to keep books current. A year-end close happens once, after the final month is reconciled, and it is the point where QuickBooks rolls net income into Retained Earnings and your accountant posts tax adjustments. The monthly close is your ongoing control; the year-end close is the final lock before the return is filed.

Do I need to reconcile every account before closing the books?

Yes. Reconcile every bank, credit card, and loan account through the end of the year before you close it. Reconciliation is what proves your QuickBooks balances match the statements, and the steps are in the guide to reconciling bank statements in QuickBooks; closing an unreconciled year just locks in errors. If a month won't reconcile because transactions are missing, import the statement for that month first, then reconcile, then close.

What happens to net income when I close the year?

When a new fiscal year begins, QuickBooks automatically moves the prior year's net income into the Retained Earnings account on your balance sheet. You do not post this entry yourself; QuickBooks handles the roll-over so your income and expense accounts start the new year at zero while the cumulative result lives in equity. Closing the books simply locks the year that produced it.

What is a year-end closing entry in QuickBooks?

In most cases you do not make a manual closing entry. Unlike older systems, QuickBooks Online and Desktop automatically close income and expense accounts to Retained Earnings at year-end. The journal entries you do make are adjusting entries, things like depreciation, accruals, and tax provisions your accountant posts, and those go in before you set the closing date.

Can I edit transactions after the closing date?

Only if you choose to allow it. If you set the closing date with a password, changing anything dated on or before it requires the password and shows a warning. Without a password, QuickBooks still warns you but lets the change through. Either way, editing a closed period can change figures on a filed return, so do it deliberately and tell your accountant.

How do I import last year's bank transactions before closing?

Last year's transactions come in by file, since the bank feed only reaches about 90 days. Download each missing statement, convert it to a .qbo with the converter above, then in QuickBooks Online use Transactions, Bank transactions, Upload from file. See the full walkthrough for importing bank statements into QuickBooks for taxes. Reconcile each month before you close it.

What reports should I run before closing the year?

Run the Profit and Loss, Balance Sheet, and Statement of Cash Flows for the full year, plus the bank reconciliation report for each account. Review them for negative balances, uncategorized amounts, and anything in Ask My Accountant. These are the same reports your CPA needs, so cleaning them up before you close means fewer questions and a faster, cheaper return.

What do I send my accountant after closing the books?

Give your accountant access to the QuickBooks company, or export the Profit and Loss, Balance Sheet, and General Ledger report for the closed year. If you handle several entities or clients, bank statement to QuickBooks for accountants covers doing this at volume. Reconciled, closed books mean they can prepare the return without re-doing your bookkeeping.

How do I set a closing date password?

In QuickBooks Online, the password is part of the same Close the books setting under Account and settings, Advanced, Accounting: choose the option that requires a password to change closed transactions, then enter one. In Desktop, set it under Edit, Preferences, Accounting, Company Preferences, Set Date/Password. Keep the password with whoever controls the books, not shared widely.

Closing a year you have fallen behind on starts with getting every transaction in: see import bank statements into QuickBooks for taxes for the full-year catch-up, and how far back QuickBooks can import bank transactions for the limits. To clear the books before you lock them, an accounts payable automation tool helps you settle outstanding vendor bills, purchase order management matches open POs to what was received, and a bank statement to Excel converter gives you a spreadsheet to tie the year out against before you close.