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

This article describes what Journal Entries are needed to close your books at year-end.

Before closing your books we 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.
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.
All Revenue and Expense accounts will need to be closed into an Income Summary, then into Retained Earnings.

We highly suggest that you review all accounting procedures with your CPA.

Please note that once you close your books for that fiscal year, no other entries are to be made for that period.

Closing Revenues and Expenses

Navigate to the Chart of Accounts:

If these accounts do not exist, add an Expense account called Income Summary and an Owner's Equity account called Retained Earnings.
Go to your Profit and Loss Report/Income Statement.
Filter the Profit and Loss Report to the Fiscal Period your are closing out.
Take note of all the Revenue and Expense Accounts.
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.
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 + at the top right of the header.
In the last line of the entry select the Income Summary account you created and credit the total of all the Revenue account.
Select Save and Close.

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.

To close Revenue and Expenses accounts:

Create a new Journal Entry and date it for the last day of the closing period
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 + at the top right of the header.
In the last line of the entry select the Income Summary account you created and debit the total of all the expense accounts
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.

[This is only required if opening balances were entered in on migration to CARET Legal.]

Go to your Profit and Loss Report/Income Statement
Filter the Profit and Loss Report to the Fiscal Period you are closing out
Take note of the Opening Balance Equity account(s)
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
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 + at the top right of the header.
In the last line of the entry select the Income Summary account and credit the total of all the Opening Balance Equity account(s)
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).

Closing Income Summary

To close the Income Summary:

Create a new Journal Entry and date it for the last day of the closing period
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.
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.
Select Save and Close.

For 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