The following guide goes through best practices when closing an accounting year in Studio Designer. You should always consult with a CPA on what additional adjustments or reports are needed before closing the year.
Why do I need to Close the Year on my Studio Designer Account?
Studio Designer allows you to have two open years on your account. This means you can record transactions to your general ledger within a two-year span. This usually means you have the current accounting year open so you can record new activity for your business, and the previous year open for you to review and adjust your balances before filing a tax return.
Once you have filed tax returns for a year, you will want to close that year to lock your account balances for that year, and make sure you open the upcoming year to record new transactions.
For example, If you have 2020 and 2021 open on your account, closing the year will lock your account balances for 2020 and open 2022 so you can record new accounting activity. If you do not open 2022, all new transactions on your account will be dated 12/31/2021.
What to do before Closing the Year
Review your Account Balances
Reconcile your Bank and Credit Card Accounts
You should be reconciling your bank and credit card accounts on a regular basis to make sure all of the transactions on your account statements match the transaction data in Studio Designer. Before closing the year you should reconcile your bank and credit card accounts through the year you are going to close so that the account balances in Studio Designer match the balances on your accounts.
This guide goes through how to perform bank and credit card reconciliation in Studio Designer:
Review Client and Vendor Balances
There are a few reports you can review to make sure your balances are up to date. You can find these reports by going to the Reports section on your account and searching by the report name
01 Work in Progress (WIP) by Vendor: This report shows you items that are on a Purchase Order but have not been invoiced to the client. Review this report to see what items you still need to invoice to the client and if there are amounts due to the vendor.
02 Vendor Deposits Detail: This report shows you payments made on orders that have not been invoiced to the client. You can find it by clicking the "Go to Financial Forms" button at the top of the Reports section. Use this report in conjunction with the Work in Progress report to see if there are items that should be invoiced to the client. You need to invoice these items to the client for the cost of sales to be recognized in your income statement.
Accounts Payable by Order: This report shows you balances due on orders that have been invoiced to your client. Review this report to see if there are vendor payments that need to be recorded in Studio Designer.
02 Client Deposits by Item: This report shows client payments on un-invoiced items and in Funds Available You can find it by clicking the "Go to Financial Forms" button at the top of the Reports section. Use this report to see items that need to be invoiced to the client, or if there are payments in Funds Available that should be applied to invoices. You need to invoice these items to the client for the sales to be recognized in your income statement.
Accounts Receivable by Invoice: This report show balances due on client invoices. Review this report to see if there are client payments that need to be recorded in Studio Designer.
If there are items on these reports that you think are there in error, reach out to email@example.com and we can review items.
1099s are sent to individuals or businesses you paid for services. 1099s are only required for sole props, LLCs, or partnerships. You do not need to send a 1099 to C corps or S corps. You should consult with a CPA on how best to send 1099s and to whom you need to send a 1099.
This guide goes over how to pull your payment information from Studio Designer to get accurate amounts to report on your 1099s: 1099 Reports
Print a Balance Sheet and Income Statement
Your CPA will likely need a Balance Sheet and Income Statement (Profit and Loss Statement) to file your tax return. You should consult with your CPA to determine what additional information they need before closing a year on your account.
Go to Reports and select the "Go to Financial Forms" button to create a PDF of the 01 Balance Sheet and 01 Income Statement.
Close the Year
Once you have filed your tax return for an accounting year, you should close that year to lock your account balances for that year. Confirm with your CPA if it is okay to close the year or if there are any adjustments that need to be made on your account before closing.
To access Close the Year, click on Accounting from your left-hand menu and select "Close the Year"
- When you click the Close the Year button it will close only the one year stated on the button
- After the year is closed it cannot be reopened. Please make sure there are no adjustments you need to make in the year you are closing.
- No entries can be made to a year after it is closed.
Once you click the close they year button, it will close the year stated on the button and open up the next accounting year.
For a more detailed explanation of how you can review your account balances before closing the year, watch the below training webinars. Note: You will need to create a login to view these webinar recordings