Nonprofit Bookkeeping & Accounting For Dummies, 2nd Edition

Chapter 21

Closing the Nonprofit Books

IN THIS CHAPTER

Knowing why you need to close the books

Completing year-end entries

Including notes with your financial statements

As you come to the end of your accounting year, you need to wrap up your books for the previous year and start the books for the next year. Your accounting period indicated the beginning and end of your reporting period, which can be 6, 12, or 18 months, depending on the needs of your nonprofit. If you choose the most common reporting period of 12 months, this period can be a calendar year (January to December) or a fiscal year (using another 12-month period). No matter when your accounting year ends, you need to close your books and start a new accounting cycle or year.

When you close your books, you need to make sure all your temporary accounts, such as your revenue and expense accounts, return to having a zero balance so revenues and expenses in the next accounting cycle can properly record and close. To do so, you have to make some closing entries to certain accounts. Closing your books is an important process because you need to transfer the balance from statement of activities accounts to another account, ...