In the recent thread with Marilyn Graves, and also in previous threads, it has been asserted that closing of accounts at the end of a period is not needed. But it is needed!
It has accurately been pointed out that Gnucash or other modern accounting software does not need users to go through manual steps a) to close out temporary account balances (for every revenue and expense account) to a temporary net income account, and b) to close the temporary net income account to a retained income account within equity. That is so; the software does that automatically. It may be true (I think it is true) that for an entity that strictly uses cash accounting and does not recognize accruals of any kind, that no other closing entries are needed. But, for any entity with full accrual accounting, or with any small part of accrual accounting, it is normally necessary to make closing entries, typically dated December 31, to update accruals. Often requiring use of information not available until later: *use of info from bills known already plus bills coming in during January, to make an accurate statement of Accounts Payable as of December 31. *if capital assets are being recognized, record depreciation for the year, putting in at December 31. *if tithing obligations are being accrued, do an update *about taxes due, perform a good analysis of tax obligations stemming from the year (i.e. by going through your process of filing tax forms with the government), and then recognizing any additional tax expense if the amounts recognized during the year were not enough (or show a negative tax expense on December 31 if too much has been recognized), in the process making an accurate Taxes payable balance. And so on, for other accruals. And when you are really satisfied, then you should lock transactions up to December 31, so that in the future neither you nor anyone else can accidentally enter transactions that are miss-dated. Except perhaps changes could be allowed by use of a password. Within past Gnucash development, there has been refusal to allow such locking, but it is an essential, crucial part of accounting, IMO. A big credibility issue for Gnucash, relative to other accounting software that does allow for such, because it is so basic to professional accounting practice. I am not sure of current state of affairs on this. One objection to allowing locking, which I recall, is that programmer-types would know how to bypass the locking so it would not be a perfect control. However it obviously would be a control that helps avoid accidental changes or changes by uninformed data entry staff. Don If you do not update your accruals on December 31, then Income Statement periods ending on that date and Balance Sheet of that date will be misstated. If you want quarterly reports to be accurate this way (not generally necessary) then you need to perform similar closes on _______________________________________________ gnucash-user mailing list gnucash-user@gnucash.org To update your subscription preferences or to unsubscribe: https://lists.gnucash.org/mailman/listinfo/gnucash-user If you are using Nabble or Gmane, please see https://wiki.gnucash.org/wiki/Mailing_Lists for more information. ----- Please remember to CC this list on all your replies. You can do this by using Reply-To-List or Reply-All.
