Closing an Accounting Period

Closing a period locks a fiscal year so no one can accidentally change past transactions. It also creates a closing entry that rolls your fund balances forward to the next year. You should close each fiscal year after all transactions are finalized -- and you must close before filing your 990.

Without closing, anyone with access could edit or delete last year's transactions, which would change your financial statements after they've been shared with the board, auditors, or the IRS. Closing protects the integrity of your historical records. The closing entry also ensures your fund balances carry forward correctly to the next year.

• Reconcile all bank accounts for the fiscal year. See Bank Reconciliation. Unreconciled accounts are flagged as blockers.
• Resolve pending placeholders. Any unfinished placeholder entries should be completed or dismissed.
• Review the Trial Balance report to check for unexpected balances or imbalances. See Running Reports.
• Make sure all transactions for the period are posted. Late entries are common -- check with anyone who enters transactions.

Step 1: Go to the periods list

Go to Managing Your Books > Periods from the sidebar. You'll see a list of your fiscal years with their status (open or locked).

Step 2: Select the period to close

Find the fiscal year you want to close and click Close Period. NP Ledger opens the closing preview.

Step 3: Review the closing preview

The preview shows everything that will happen when you close:

Fund-by-fund summary: - Revenue, expenses, and net income for each fund - The net income (or loss) determines how much is added to each fund's net asset balance

Closing entry preview: - The journal entry NP Ledger will create automatically - Revenue accounts are debited (zeroed out) and expense accounts are credited (zeroed out) - The net difference for each fund is posted to the appropriate net asset account (with or without donor restrictions)

Blockers (if any): - Unreconciled bank accounts - Pending transactions - Other issues that should be resolved before closing

Step 4: Resolve any blockers

If the preview shows blockers, address them first: - Unreconciled accounts: Complete the bank reconciliation - Pending items: Post or delete pending transactions - Come back to the closing preview after resolving issues

Step 5: Execute the close

Click Execute Close. NP Ledger: 1. Creates the closing journal entry 2. Locks the period -- a "locked" badge appears on the period 3. Carries fund balances forward to the next period

• Transactions in the closed period can no longer be edited or deleted
• Reports for the closed period show final numbers
• The next fiscal year starts with the carried-forward balances
• You can now start the 990 Wizard for the closed year

Sometimes you need to correct something after closing. Only the organization owner can reopen a period:

1. Go to Managing Your Books > Periods
2. Click Reopen next to the locked period
3. The period unlocks, allowing transaction edits

Important: Reopening does NOT reverse the closing entry. If you add, edit, or delete transactions after reopening, you may need to re-close the period to generate an updated closing entry. Frequent reopening undermines the purpose of closing -- try to catch everything before you close.

• Fund balances carried forward correctly. Run the Statement of Financial Position for the new period and verify opening balances match the prior period's closing balances.
• Net income moved to the right net asset accounts. Restricted fund income should go to "with donor restrictions" net assets; unrestricted should go to "without donor restrictions."
• No transactions are missing. If something was overlooked, it's better to catch it now than to reopen later.

• Closing before reconciling bank accounts. This is the most common mistake. Always reconcile first -- the closing preview flags unreconciled accounts for this reason.
• Closing the wrong fiscal year. Double-check the dates before clicking Execute. If you have multiple open fiscal years, make sure you're closing the right one.
• Not reviewing the closing preview. The preview exists to catch problems. If net income for a fund looks wrong, investigate before closing.
• Reopening frequently. If you find yourself reopening often, it may mean you're closing too early. Wait until all transactions are truly final.
• Forgetting to reconcile bank statements for the last month. December statements (for calendar-year filers) often arrive in January -- wait for them before closing.

Accountant Note: The period close process creates an adjusting entry that closes temporary accounts (revenue and expenses) to net asset accounts per ASC 958-205. Each fund's net income is posted to the corresponding net asset account based on restriction classification. Revenue accounts are debited and expense accounts are credited to bring them to zero; the net difference is credited (for net income) or debited (for net loss) to the appropriate net asset account. This maintains the fundamental accounting equation and ensures proper net asset classification per ASU 2016-14.