End of year question

[Beth Leonard]

On Mon, Jan 09, 2006 at 10:17:15PM -0800, Des Dougan wrote:
> > I hope that book-closing support is fairly high on the post-G2
> > priority list, and I think it is.
> 
> >From previous threads here, it would seem so. How do you, personally, do
> book closing if you continue to use the same file, BTW?

Poorly ;-)

I originally started using gnucash because I needed to know how
much I was giving to charity each year, and how much I was spending
on home improvements, utilities, etc. for my taxes.  (We were renting
out rooms in our house, making the rent taxable, but the home
improvements partially tax deductible.)  

I used to start over with a new file for each year, but as I started
importing more and more transactions, including my credit card
statements to figure out where I was spending all my money, I got
tired of re-matching expenses with accounts each year.  After
asking around on the list and a little experimenting,
here's what I do.  It's not authoritative, and if anyone else
(especially accountants) has a better way to do this, I'd love to
hear it.

Slightly after January 1st I download all my statements and import
all transactions having to do with 2005.  I balance my checkbook
and do some other sanity checks to make sure everything is correct
and complete to the best of my ability.  I've recently started
using gnucash's Reconcile feature, and it seems to work fairly
well.  It also marks those transactions as reconciled, so that if
I attempt to change the closed transactions in future years, it
warns me I'm changing reconciled data.  This is a 'y' in the 'y/n/c'
field of the "R"econciled column.

I keep a box of business expense receipts.  In my
"expenses:business expenses" account in my personal books (I
don't have a business credit card yet) I clear each one
by clicking on the little 'n' in the 'R'econciled
column to change it to a 'c'.  I consider a business expense
to be cleared if I have the paper receipt in my file, should
the IRS ever come knocking.  If I'm missing anything I make
corrections before calling the file done.  I then "Reconcile"
the Expenses:Business Expenses account by accepting the default
dollar amount and making sure everything is checked.  You don't
need to do this, but it's just an extra check to be sure you don't
accidently change something later that has tax consequences.

Once I'm finished, I save aside a copy of my gnucash file
2005-Final-Personal.gnucash.  For completeness I should really
write a copy to CD and mail it to my parents for
an off-site backup...  your backup strategy may vary.

Now I go back to my continuing expenses.gnucash file, the same
one as before.  I create a transaction in each income and
expense account dated 12/31/05 that makes the account balance
go to zero.  The balancing accounts are:

Equity:Retained Earnings:2005 Year End Expenses                   
Equity:Retained Earnings:2005 Year End Income                 

I name the transactions names like "Year End Groceries"
"Year End Phone" etc. so that looking down the year end account
gives me quick glance good idea of where I spent my money.

I only do this for income and expense.  My income and expenses
are things that I need to know annual totals -- to answer the
question "How much did I give to charity in 2005?"  Don't
zero out your bank account, other assets, liabilities, and stocks
because those continue on.  You may wish to do annual
depreciation on your car, etc. to expense accounts if
you track those assets -- some people do that.  There
was a discussion not too long ago about it.

If I had any real transactions on 12/31, I move them to 12/30 so
that if I want to do any 2005 reports while still using the 
current file I can just specify the date range from 1/1/05 to
12/30/05 and miss out on those end-of-year zeroing transactions.

Good luck!  If anyone else has ideas or best practices, I'd love
to hear them.

--Beth 
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+                             Beth Leonard                          +
+       O say, does that star-spangled banner yet wave              +
+       O'er the land of the free and the home of the brave?        +
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