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Close an accounting period

Historically, the accounting cycle involved numerous tasks to “close the books” at the end of an accounting period, whether a month, quarter, or year. Income and expense summaries were developed, trial balances were created, amounts were transferred with journal entries, and so forth. Most steps were designed to:

These practices developed over centuries, not only to support meaningful analysis, but also to combat unavoidable omissions, mental miscalculations, and oversights when entering and posting hundreds or thousands of transactions manually.

Manager eliminates the need for most of these steps by:

Closing the books

At the end of any accounting period, just a few tasks are normally required. For many businesses, these steps are only performed annually:

  1. Make necessary adjusting entries (when using accrual basis accounting) for prepaid expenses and income items.
  2. Make desired distributions of earnings to capital or equity accounts using journal entries.
  3. Pay out desired dividends or draws.
  4. Create desired reports for the accounting period. These might be limited to a Profit and Loss Statement and Balance Sheet. Of course, others can be added to suit needs of management, accountants, or tax authorities. Reports can be printed, stored electronically, or just saved in Manager.
  5. Consider locking past transactions by setting the lock date once end-of-period adjustments are complete. This prevents changes to transactions forming the basis for statutory reporting obligations and tax returns.

Note
For many small businesses, especially sole traders/proprietors, none of these steps might be necessary. Perhaps the business has no prepaid items. Depending on the equity structure of the chart of accounts, the second and third steps might have happened over the course of the accounting period. And reports can always be generated later if they are needed.

Setting up the next accounting period

The only essential step prior to entering transactions for the next period is resetting the period in the Summary tab. Click on Set Period:

Be sure the box is checked to show balances for the specified period. Otherwise, all transactions from the date Manager was first used will be included. Enter the first day of the new accounting period in the From field. Normally, select Today as the Until date so the Summary is always current, but no transactions entered in advance will be included until their entry dates are reached. To begin accounting work for the new period, click Update:

You might want to define common reports for the new accounting period, too. That way, they will be quickly available when needed. But they can also be created later.

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