Closing Financial Periods has these advantages:
1. Diagnostics and some reports run faster.
2. Purging old data can only be done in closed periods.
3. User can not enter a date into a closed period.
Example of why #3 can cost you money:
On July 15 you give your accountant an invoice log or Ledger report that includes the previous 6 months, Jan 1 through June 30. She calculates your taxes from this report. You do not close periods.
On July 20 you adjust an invoice dated June 2 for a bad debt of $3,000, and you back date the transaction to June to line up with the invoice date. Your adjustment does not show up on the next report you give your accountant.
You will pay unnecessary taxes on $3,000.
The same thing can happen at end of year. It is the only way of protecting “published” financial statements. Ask your accountant.
Last revised: 8/10/11 by AG