How to close a financial year

[doncram]

The advice to Anita to close a year's books, with warning present in the
that doing so will destroy usability of reports henceforth, is quite
alarming!  What is meant by "closing" in GnuCash-jargon seems different
than what is meant more usually in accounting.

In an entirely manual accounting, closing the books at the end of year or
other period involves several steps:
1. Recognize accruals (non-cash entries) such as:
**depreciation
**allowance for bad debt (uncollectible accounts)
**accrue payroll liabilities (assuming payroll date was not at the end of
year, some liability of salaries and benefits needs to be accrued
**accrue tax liabilities
**other adjusting entries (to adjust assets and liabilities)
2. Make journal entries transferring expense and revenue account balances
to income statement summary accounts, i.e. generating an income statement
3. Close the income statement summary accounts to retained earnings
4. Freezing forever the accounts for the period (in software, this would be
done by putting a lock on any transactions before the new period)

I am guessing that GnuCash does not support #4.
I gather that in GnuCash, #2 and #3 don't need to be done, because the
income statement report already exists.  And if they are done anyhow then
usability of reports will be destroyed.  A user wants to be able to
generate reports from prior years, e.g. for making comparisons.
About #1, advising Anita how to proceed would require some more information
on what the current balance sheet shows and what assets and liabilities
need to be updated.

Anita, does this begin to help?  And could anyone else clarify?  I
personally am willing to help update the GnuCash documentation about
closing, as this is important!

cheers, Don


On Mon, May 22, 2017 at 4:41 PM, DaveC49 <davidcousens at bigpond.com> wrote:

> Anita
>
> The Wiki has a secion discussing it at
>
> https://wiki.gnucash.org/wiki/Closing_Books
>
> and the documentation tells you how to use the built in routine for it at
>
> https://www.gnucash.org/docs/v2.6/C/gnucash-help/tool-close-book.html
>
> David Cousens
>
>
>
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