Product Tips
Master Tip: How to Protect Prior Period Transactions in QuickBooks®By: Sandi Smith, CPA
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Editor's Note: From time to time, we will publish a Master Tip from a practitioner who is able to provide in-depth comments to a common accounting issue. We thank Sandi Smith for allowing us to share this tip with you.
Situation
Elsewhere Joe Woodard has written how QuickBooks maintains a perpetually open nature. (See his tip here.) In QuickBooks, you never have to close out a prior accounting period, but there may be some cases where you'll want to, for added control.
So, given this state of affairs, would you like to know when a user adds a transaction that modifies prior period account balances? Would you like to prevent users from adding prior period transactions?
Response
Both options are completely possible in QuickBooks. I'll show you how.
Preventing Users from Making Prior Period Transactions
Once you've completed posting all adjusting entries to a prior period, you can "close" the period in QuickBooks. You'll need to switch to single-user mode to make this change. Choose Preferences from the Edit menu and select the Accounting button. Click the Company Preferences tab and look at the bottom of the window. You'll see a place to enter a closing date. Enter 12/31/2004 or the ending date of the period you which to close. Click the Set Password button, and a dialog box will appear with a place for you to enter and confirm a password. Click OK twice to save your changes. The password will now be required when anyone tries to add, change, or delete a transaction that affects account balances on or before the closing date you entered. (You can also leave the password blank if you prefer.)
Let's test our work by opening a 2003 invoice. I will try to modify the sales tax of this invoice, and when I do, a dialog box pops up. It warns me as follows:
"This modification will affect transactions from closed periods and could also affect previous financial reports.""You must enter the 'closing date' password to make this change."
Enter the password, and you can make the change. If you don't know the password, you'll have to cancel out of the transaction, leaving it as it was originally. The password serves to restrict access to prior period transactions so that the accountant has more control over the closing balances.
Looking for Changes to Prior Period Account Balances
How can you find out what transactions were made to the closing period after the fact? You can take a look at the Closing Date Exception Report. Find it under the Reports menu in the Accountant's section. Each transaction that was made after you entered the closing date in the Accounting Preferences window and that affects balances on or before the closing date will be listed. It will show a "before" and "after" of each transaction.
This report gives you the control you need. Many times I have walked into a client's office and spent hours trying to reconcile last year's reports and the QuickBooks file balances, only to find that additional transactions were made. Now it will save hours to run this report and find out what the differences are in just minutes.
With the closing date tool, password, and report, just let clients wreak havoc to their older records. We can now get to the bottom of the mystery in seconds.
Sandi Smith, CPA, is a long-time contributor to Intuit ProConnection and advises business owners and organization leaders how to get more business from their web sites. Her web site is www.sandismith.com.
Last Updated: 05/18/2005
