How to close a financial year

Wed May 24 23:49:35 EDT 2017

Don, 
Your contributions will be welcome. As I do not close my books, and also do not use the business features, I can only offer you editorial guidance and general help in the process. 
As for the term "Chart of Accounts", Gnucash uses this term for the page that displays all accounts in a hierarchical tree, i.e., the first summary page when you open a file. This page in Gnucash includes balances, although it is configurable. This is noted in the glossary, although the definition might be improved to explain Gnucash's spin on the term. 

As stated elsewhere, the wiki is not the same as the documentation, and this is intentional. The docs are more formal, whereas the wiki is more immediate. In the past, information has tended to gravitate in one place or the other, and once there, stays there. If your goal is to improve the docs (which I endorse), I think you should file a bug and work through that mechanism, rather than put stuff into the wiki that you intend to place in the docs. 
David

  On Thu, May 25, 2017 at 7:57, doncram<doncram at gmail.com> wrote:   Thank you to David T. and to Michael D Novack and others for observations
on closing.  Ideas from these and other comments that I can look for in
past ("annual") discussions oughta be incorporated into documentation.
Some notes while this is fresh:

*Annual discussions, true "frequently asked questions" --> opportunity to
improve documentation

*The Tutorial and Concept Guide does not address closing at all, if I am
not mistaken...it should be covered in Chapter 13 about businesses and it
also should be covered in closing for personal finances

*The Wiki coverage (http://lists.gnucash.org/wiki/Closing_Books) is
alarming to me in the difference of its terminology from that of
introductory accounting textbook treatment of the topic...it suggests the
purpose of closing is to zero out account balances or to "zero
transactions". I need to review textbook treatment myself, but what's
needed in explanation to regular users is a discussion of all the usual
aspects, starting with making adjusting entries -- a huge theme in chapter
after chapter of textbooks (e.g. recognize accrued interest in mortgages,
loan & bond liabilities and assets, for one i didn't mention yet).  Provide
example journal entries of each type.

*Then go through discussion of all the logical steps of closing in a manual
system or in big commercial accounting software, and how you can
approximate that in GnuCash (e.g., as suggested, make a point of backing up
the data and securely storing/distributing it).

*Note freezing is not the same...the prior years data stays in your system,
and if it is not frozen then errors can be introduced, you might
accidentally add or change a prior year transaction.  In commercial
standard accounting, the past data is locked by password at least, and
prior year info is only changed in exceptional circumstances (explain
those...and how even for public restatements of financials, the past info
is likely not changed).

*I still am gathering that password-locking the past period data is not
possible.

*Both the Wiki and the Help coverage use incorrect-to-my-ears language
about the Chart of Accounts, both saying that the Chart of Accounts will
show amounts of some kind.  GnuCash usage should be brought into conformity
with accounting usage where the Chart of Accounts is a list of the account
names and account numbers and account types only;  it does not have any
dollar amounts.  The GnuCash usage is referring to what I would call Trial
Balances i think.

*What is the goal in closing?  I think it is about bringing the state of
financial reporting into a "good state", e.g. where the Balance Sheet and
the Income Statement/Statement of Revenues and Expenses are accurate in
accordance with your organization's or your personal accounting standards,
perhaps U.S. Generally Accepted Accounting Principles perhaps with
modifications, or perhaps compliance with Tax filing (or both).  Perhaps it
is cash basis.  What your nonprofit's board or independent accountant will
likely accept.  An individual may want their accounting to match tax filing
(close but not same as cash basis), e.g. use depreciation per tax standards
rather than GAAP, which is a choice.  The goal could be to accurately
state your income as will match on tax forms.  A number of adjusting
entries are needed, and once a year perhaps is good for considering
revaluations of property, etc.  Side note: for U.S. personal taxes if you
deduct car usage for personal business usage according to mileage at
allowable rate, that means that you need to make an accrual, an adjustment,
relating to difference between that vs. your "actual" car expenses.  The
Tutorial and Concept Guide treatment should start with the goal(s) you can
have.

I gather I should submit a bug through Bugzilla to address changes for the
Manual and changes for the Tutorial and Concept Guide. Presumably I could
just edit the Wiki section directly.  I don't yet understand how the Wiki
is supposed to relate to the other documentation. Maybe the Wiki is to
cover stuff not yet in the "formal" documentation (the Manual and the
Guide, which are harder to change)?  --cheers, Don

On Wed, May 24, 2017 at 3:01 PM, Mike or Penny Novack <
stepbystepfarm at dialup4less.com> wrote:

> On 5/24/2017 10:46 AM, doncram wrote:
>
>>  .......  What is meant by "closing" in GnuCash-jargon seems different
>> than what is meant more usually in accounting.
>> I............
>> 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.
>>
> a) The intermediate steps once used in pen and ink on paper accounting are
> indeed redundant and can be skipped
>
> b) No, #4 is EASY. Your confusion is in forgetting that in old fashioned
> pen and ink on paper accounting this was done by putting the old journal
> and ledger volumes away when the volumes for the new period began. You do
> the SAME THING with gnucash if you wish. I suspect that the reason you
> didn't "see it" is you were expecting a "button to push"? (within gnucash)
>    1) To make a file unalterable, you make a copy of that file onto read
> only medium.
>    2) Making copies of files is something you ordinarily do outside of
> applications. How are you now making backups? This is just a special sort
> of backup (one on medium that makes it read only).
>
> When I am doing this for one of the organizations for which I keep books,
> I do a pre-close backup (after adjusting entries like depreciation but
> before closing income and expense accounts to equity) and a post close
> backup, burn copies to CDROM (or DVDROM) and among other things, make sure
> some other officer of the organization gets copies. You do the "Income
> Statement" (well "Statement of Revenues and Expenses" as my organizations
> are non-profits) in the pre-close and the "Balance Sheet" either.
>
>
>
> Michael D Novack
>
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