How do you close/zero out accounts at year end?

How do you close/zero out accounts at year end?

In this article, you will learn what journal entries are needed to close your books at year-end.

Please note that once you close your books for that fiscal year, no other entries are to be made for that period. Thus, before closing your books we suggest that you review and complete all customer invoicing, ensure that all expenses have been entered, complete the bank reconciliation, add taxes, verify that all other (asset and liability) accounts are correct and if you do your accounting on the accrual basis make sure that all the necessary accruals have been made. If needed make any year-end adjusting entries to Retained Earnings. We highly suggest that you review all accounting procedures with your CPA. 

All Revenue and Expense accounts will need to be closed into Income Summary, then Income Summary closed into Retained Earnings. 

Closing Revenues and Expenses 
  1. Go to the Chart of Accounts
  2. If these accounts are not already there add an Expense account called "Income Summary" and an Owner's Equity account called "Retained Earnings"
  3. Go to your Profit and Loss Report/Income Statement
  4. Filter the Profit and Loss Report to the Fiscal Period your are closing out
  5. Take note of all the Revenue and Expense Accounts
  6. In a new browser tab go to the New Journal Entry Window and create a new journal entry. Date it for the last day of the closing period
  7. Select all the revenue accounts noted in the Profit and Loss Report and debit the amounts. If you need to add more lines to an entry select the + at the top right of the header.
  8. In the last line of the entry select the Income Summary account you created and credit the total of all the revenue accounts
  9. Select Save and Close. Please make sure all the calculations and numbers are entered in correctly. This Journal Entry will close/zero out the balances in all the revenue accounts.
  10. Create a new journal entry. Date it for the last day of the closing period
  11. Select all the expense accounts noted in the Profit and Loss Report and credit the amounts. If you need to add more lines to an entry select the + at the top right of the header.
  12. In the last line of the entry select the Income Summary account you created and debit the total of all the expense accounts
  13. Select Save and Close. Please make sure all the calculations and numbers are entered in correctly. This journal entry will close/zero out the balances in all the expense accounts.
Closing Opening Balance Equity account(s) [This is only required if opening balances were entered in on migration to Zola Suite]
  1. Go to your Profit and Loss Report/Income Statement
  2. Filter the Profit and Loss Report to the Fiscal Period your are closing out
  3. Take note of the Opening Balance Equity account(s)
  4. In a new browser tab go to the New Journal Entry Window and create a new journal entry. Date it for the last day of the closing period
  5. Select the opening balance equity account(s) noted in the Profit and Loss Report and debit the amounts. If you need to add more lines to an entry select the + at the top right of the header.
  6. In the last line of the entry select the Income Summary account and credit the total of all the opening balance equity account(s)
  7. Select Save and Close. Please make sure all the calculations and numbers are entered in correctly. This Journal Entry will close/zero out the balances in all the opening balance equity account(s) accounts.
Closing Income Summary
  1. Create a new journal entry. Date it for the last day of the closing period
  2. Select the Income Summary account and debit/credit it by the Net Income amount noted from the Profit and Loss Report. If you had more revenues than expenses (profit) then you would debit Income Summary and vise versa.
  3. Select the retained earnings account and debit/credit the same amount as the income summary. If you credited income summary you would do the opposite do the retained earnings and credit it. 
  4. Select Save and Close.

Here is an example:

Firm XYZ is closing their books' for 2016
  • Steps 1-2 - Add/Confirm accounts

  • Steps 3-5 - Take note of all the Revenue and Expense Accounts

  • Steps 6-9 - Close Revenue Accounts to Income Summary (Fee Discount is naturally Debited so in order to close it out we would need to credit)

  • Steps 10-13 - Close Expense Accounts to Income Summary
  • Steps 14-17 -Close Income Summary to Retained Earning


    • Related Articles

    • How Do I Customize Permissions for Bank Accounts?

      Do you have Bank Accounts that you only want certain users to be able to access?  Now, you have the ability to grant permissions on a user by user basis to access bank registers and check writing capabilities. This article will show you how.  From ...
    • How Do I Enter And Pay Accounts Payable/Vendor Invoices?

      When receiving a bill from a firm provider, make sure to add it to Zola Suite's Vendor and Bills section. Doing so will increase Accounts Payable on Accrual. This will give you the ability to report on how much the firm owes from bills that are ...
    • How Do I Change a Matter's Status to Closed?

      You can change the status of a Matter from within the Matter Details page. When you hover over the status field, click the pencil button that shows. From here you can change the Matter status from Open to Closed, then click the check button to save ...
    • Why Am I Seeing Duplicate Transactions When Using Download and Review?

      Through our integration with Plaid, you may from time to time see what appears to be a duplicate transaction in the download feed. These are in fact not true duplicates, but are based on the status of the transaction at the time you perform the ...
    • What Types of Email Accounts Does Zola Suite Support?

      Zola Suite's email client is designed to work best with Gmail/G Suite accounts and Office 365 accounts through Microsoft. Zola Suite is able to connect with other accounts via IMAP, but this is not recommended. Learn how to set up your email account ...

    Status

    Experiencing degraded performance in Zola Suite?