I’m often impatient to get going on the new year and don’t look forward to taking the extra time to close out last year. There’s often new budgets to setup, payroll amounts to adjust, and final reports. There’s also those pesky journal entries that you often need to properly close a year. Here’s a list of common journal entries you may need depending on your basis of accounting (cash, accrual, or somewhere in between):
- Donor-Restricted Funds: If you track income and expenses for designated gifts, what about the balance of any unspent funds? Usually these are recorded in the Equity section. I also give you some ideas of alternatives.
- Fixed Assets & Capital Expenses: It’s not common but some churches keep track of their fixed assets (i.e. buildings, equipment, land) on the balance sheet. If you initially expense a capital improvement (e.g. replacing the furnace), that expense will close to retained earnings. You’ll need a journal entry to debit fixed assets and credit retained earnings.
- Timing Issues: If you use accrual accounting, you’ll need to check that income and expenses in the months before and after yearend are recorded in the correct year.
Useful Links
- Post on Closing and Accounting Period: https://jctaccounting.com/2020/05/01/closing-a-month-or-year-in-quickbooks-online/
- Post on Handling Donor-Restricted Funds: https://jctaccounting.com/2019/12/02/how-can-you-handle-donor-restricted-funds-in-quickbooks/
- QuickBooks Explanation on Retained Earnings: https://quickbooks.intuit.com/ca/resources/finance-accounting/what-are-retained-earnings/
JCT Accounting Co 