Year End File Management Overview - Accounting Software Secrets
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Year End File Management Overview

Year End File Management Overview

Year End File Management Overview

Data Integrity – Checking the data integrity at year end is highly recommended.  It is a good business practice to check the integrity much more frequently than that.  At a minimum an annual check up will uncover any data integrity problems that may result in the need to start again.  Year End is the perfect time to start a new file, if that is what is needed. 

New File – It is not the opinion of this author that a new file is needed each year.  Some accountants prefer to start a new file each year to preserve the integrity of the beginning balances.  With some client training and proper password protection procedures in place, this is not necessary.  In addition, the new file eliminates the possibility of comparative reports without the use of an add-on.


Closing entries are not needed in QuickBooks for the purpose of “closing” the Profit & Loss accounts into the Balance Sheet.  The process of closing the Profit & Loss accounts into Retained Earnings happens automatically each time a Balance Sheet is created.  It is possible to change the name of the account from Retained Earnings (to owner’s equity for a sole-proprietorship, for example) but it is not possible to change the function.  If the account is deleted, the next time a Balance Sheet report is created, the account will be added by the software automatically.  For other types of entities, such as partnerships or LLCs, as well as any other equity type accounts that need to be reclassified, a manual journal entry will be required.


Closing dates are essential to help protect prior year transactions from being changed.  As passwords are created for each user, only the admin password should have the ability to change or delete transactions in a closed period.  New with version 2002 and higher is the ability to make the password for changing the closed period different than the admin password.  This adds one more level of protection for the historical transactions.


Condense Data does not need to be done every year.  The “condense data” option will reduce the QuickBooks data file size by deleting cleared, completed, and reconciled transactions up to a specific date and replacing them with one journal entry for the month. Any transaction that has not been completed (i.e. an invoice which has not been paid in full, a bill payment which has a partial amount still due on a bill, etc.) will not be condensed.  It is recommended that several years not be condensed to make comparative detail reports easier.  For many QuickBooks files with limited transactions it may not be necessary to use this feature for many years.

More information on this topic

Year-End Procedures