QuickBooks performs certain year-end adjustments, based upon the month you chose as the start of your fiscal year. (To view or edit the starting month of your fiscal year, choose Company Information from the QuickBooks Company menu.) * At the end of each fiscal year, QuickBooks automatically transfers your net income (the difference between your gross profits and your expenses for the current fiscal year) to an automatically created Retained Earnings account (the cumulative sum of net income from previous fiscal years). * At the end of each fiscal year, QuickBooks zeros out all of your income and expense accounts (which comprise your net income) and posts the totals to the Retained Earnings account. Therefore, you start the new fiscal year with a zero net income. Y/E Task 1: update Retained Earnings. At the end of each fiscal year, QuickBooks automatically enters an adjusting entry to your income and expense accounts, posting the net income into a special account it creates called Retained Earnings. This entry is the closing entry for the year. In fact, QuickBooks never really creates a transaction for the closing entry, but when you create a Balance Sheet, QuickBooks calculates the balance in Retained Earnings (or Unrestricted Net Assets, the nonprofit terminology) by adding together the total net income for all prior fiscal years. At the start of your organizations new fiscal year, the balance in Retained Earnings on your Balance Sheet increases overnight by the amount of net income on the previous days Balance Sheet. Y/E Task 2: processing 1099s for vendors At the end of each year you must prepare, print and send IRS Form 1099 to your vendors no later than January 31. Use 1099-MISC to report payments made to vendors who performed business-related services for your company. If the vendor is a corporation or if total annual payments to the vendor do not equal or exceed $600, you are not required to prepare a Form 1099-MISC for that vendor. QuickBooks does not print any of the 1099 Forms, youll need to purchase preprinted forms and then print the detail information onto them from QuickBooks. Note that your tax tables may need to be updated for the new year in order for your 1099s to print correctly. To verify that you have the most current tax tables, select the Employees menu and choose Get Payroll Updates. Y/E Task 3: distribute income If your business is a partnership, enter a General Journal Entry to distribute net income for the year to each of the partners capital accounts. If your business is a sole proprietorship, enter a General Journal Entry closing Owners Drawing and Owners Investments into Owners Equity. Y/E Task 4: run reports Run reports for the year and verify their accuracy. Enter adjusting entries as necessary and rerun the reports. Y/E Task 5: print and file reports Print and file the following reports as of your closing date: General Ledger, Balance Sheet Standard, Statement of Cash Flows, Inventory Valuation Summary (if applicable) and Profit & Loss Standard for the Year. Y/E Task 6: back up your data file Back up your data file on a special backup diskette, zip disk or CD ROM that will never be touched. Y/E Task 7: close the QuickBooks file Set the closing date to the last day of the period you are closing. Y/E Task 8: condense the QuickBooks file? Consider condensing the data file following the instructions in the QuickBooks manual.