The Close Book dialog box is used for “closing the books,”--an accounting process that resets the balances of the income and expense accounts. In this process, income account balances are transferred into an income equity account, while expense account balances are transferred into an expense equity account. You must specify both these accounts, which may be the same. You must also specify the date for the closing transfer.
The dialog box has the following parts:
Closing Date: Specify the date for the closing transfer. You can type in a date or choose one from the drop-down.
Income Total: Specify the account into which the total balance of all income accounts will be transferred. Optionally you can create a new account to receive the transfer using the button.
Expense Total: Specify the account into which the total balance of all expense accounts will be transferred. Again, you can optionally create a new account to receive the transfer using the button.
Description: Specify the description that will be entered in the closing entry.
GnuCash closes books by
creating one transaction per currency for income accounts,
and one transaction per currency for expense accounts. The
transactions all use the date selected by the user, and each
transaction may contain any number of splits. Each split
moves the balance out of one income or expense account. The
last split in each closing transaction moves the total
offsetting debit/credit balance into the specified equity
account.
Each transaction will use the description provided by the user in the Description: entry.
The fact that GnuCash just
uses transactions to close the books makes it very simple to
undo a book closing: just delete the closing transactions.
The book closing tool does not delete any accounts or transactions; create any new files; or hide any accounts.
Note that closing the books in GnuCash
is unnecessary. You do not need to zero out
your income and expense accounts at the end of each financial
period. GnuCash’s built-in
reports automatically handle concepts like retained earnings
between two different financial periods.
In fact, closing the books reduces the usefulness of the standard reports because the reports don’t currently understand closing transactions. So from their point of view it simply looks like the net income or expense in each account for a given period was simply zero.