Closing date: how to lock last year's books

What a closing date does

A closing date locks your books up to a date you choose. Anything dated on or before it can still be seen and reported on, but it cannot be added, edited, voided or deleted. A new cheque (check) dated in the locked period is refused; a paid invoice from last year cannot be quietly changed.

It does not post anything, move any balance or create a new file. It is a lock on the door, not a change to what is in the room.

Why lock the books

Once a year is finished, numbers from it have left your hands. They are in your tax return, your financial statements, maybe a loan application or a sales tax return. If someone later edits a transaction dated in that year, your books no longer match what you filed, and you may not find out until the next year's opening balances look wrong.

The usual culprits are innocent:

A transaction entered with last year's date by mistake, typically in the first weeks of January.
A payment received against an old invoice, dated on the invoice date instead of the day the money arrived.
An old cheque voided to "clean up" a reconciliation, which changes a reconciled balance.
An account renamed or merged, with a transaction reclassified across years.
A helpful family member or new hire fixing something they found.

Records also need to stay as they were when you filed. The IRS generally expects records supporting a return to be kept for at least three years (longer in some cases), and the CRA generally expects six years from the end of the last tax year they relate to. Kept records that keep changing are not much help in a review. See tax deadlines and record keeping.

When to set it

A practical sequence for a calendar-year business:

Through the year: after each month is reconciled and reviewed, move the closing date to the end of that month. This is optional but cheap protection.
Early in the new year: finish the year-end work: reconcile every bank and card account to December 31, count inventory, record depreciation and accruals, and run the reports your accountant asks for. The year-end closing checklist has the full list.
When your accountant has finished: enter their adjusting entries, check that your reports match the figures they used, then set the closing date to the last day of the year.
After the return is filed: make a backup of the locked file and keep it with the return. That copy is your evidence of what the books said when you filed.

Do not lock the year before the accountant is done. You will just end up unlocking it for their entries.

Who can get past it

A lock nobody can open is a problem the first time a genuine correction is needed. A lock anybody can open is not a lock. Most software handles this with a closing-date password or administrator permission:

Give the password to the owner and the accountant, not to everyone who enters transactions.
Make sure overrides are recorded. A good audit log shows who posted into the closed period, when, and what changed.
Review that log after year-end work, and before each tax filing.
Remember that whoever can change the closing date itself can also undo the lock, so keep company settings in admin hands.

When a closed year needs a change

Sooner or later you find an error in a locked year: a bill posted to the wrong account, a missed invoice, a sale entered twice. You have two choices, and your accountant should decide which:

Correct it in the current year. For small items that do not affect a filed return in a way that matters, the correction is posted with a current date, and last year stays as filed. The books then still match the return.
Correct the closed year. When the error changes taxable income, sales tax or payroll figures in a way that must be fixed, the year is unlocked, the correction posted with the right date, and an amended return or adjustment filed. Lock the year again straight afterwards.

Either way, write down what was changed and why, and keep the backup from before the change.

Doing it in AcboBooks

In AcboBooks the closing date is under Company Settings, in the Close the Books panel. When you set it, AcboBooks asks you to confirm, then locks every transaction dated on or before that date: nothing can be added, edited, voided or deleted there. You can also set a closing-date password (at least four characters). With it, an administrator can enter the password to unlock the closed period for 15 minutes, for example to post the accountant's adjusting entries. Every unlock and every posting into the closed period is written to the audit log, and the Audit Trail report highlights these overrides. Without a password, the only way in is to move the closing date.

Closing entries are a separate, optional step: the Year-End Close screen posts entries that move the year's income and expenses to equity, and can reverse them.

Frequently asked questions

Does setting a closing date delete anything?

No. Every transaction stays in the file and in every report. The closing date only stops transactions dated on or before it from being added, changed, voided or deleted.

Is a closing date the same as closing entries?

No. Closing entries move the year's profit or loss into retained earnings or owner's equity. A closing date is a lock. Accounting software usually works out retained earnings in its reports without closing entries, but the lock is still worth setting.

Should I lock each month too?

Many businesses do: once a month is reconciled and reviewed, move the closing date to the last day of that month. It stops a reconciled month from changing behind your back.

What if my accountant gives me adjusting entries after I lock the year?

Enter them dated at year-end. With a password, an administrator can unlock the closed period briefly to post them, then it locks again. Without one, move the closing date back, post the entries and move it forward again.

This article is general information, not tax, legal or accounting advice. Rules and dates change; check the official source or ask your accountant before acting.