Making Changes to Closed Periods

This article deals with having to post transactions into your bookkeeping file, however the dates of these new transactions will be in financial periods that have already closed.

Depending on advice from your CPA, you may or may not be inclined to make changes within your financial records after-the-fact.

This can typically be due to the fact that your CPA (or you) has already submitted a tax return that recognizes the overall financial condition or results of a certain period of time. If, sometime later on, you decide, for whatever reasons, to change these records, then you run the risk of ruining your financial historical records. This is something that can have serious consequences in the event of an audit of your financial records later on.

In some cases, you may be inclined to officially close a period after each and every month or quarter. Then typically in these cases, the repercussions of posting bookkeeping entries after-the-fact may be less severe and may be regarded as “immaterial” in nature.

But, overall, for whatever reasons you decide that you do not want to change your financials after a landmark date, it is always best to protect this closed-period data. This can be accomplished in two ways:

1. Process and store your financial statements (typically the P&L and Balance Sheet) from these closed periods (I recommend both cash and accrual basis). Then later on, you can compare financial statements to ensure nothing has changed. This is also very effective when you switch bookkeeping software or when you completely re-design your Chart of Accounts.
2. Depending on your bookkeeping software, you may be able to create a password that will be required to submit in order for any user to post changes that will affect already-closed financial periods. If that user knows the password and makes these changes anyways, you can always go back and process, what’s called a Closing Date Exceptions Report, that will display exactly what changed (and who did it) during the time your financial records were password-protected.

Note: AccuraBooks is a bookkeeping firm only, so please consult with your C.P.A. for verification and clarification about the contents of this article.