How do we close the year without closing it twice?

Some accounts start again at zero, and some carry on

Sales, costs and expenses measure one year only. At the year end, they go back to zero, so the new year starts fresh. Accountants call them temporary accounts. Cash, the money customers owe you, your debts and the owners' equity carry their balances into the new year. Accountants call them permanent accounts¹.

The closing entries move each temporary balance into equity. The start point is the trial balance after all adjustments: a list of every account, with its debit or credit balance¹. The total of the debits must equal the total of the credits.

The skill decides temporary or permanent from the type of each account in your chart of accounts. It never decides from the name. If a name and a type disagree, it shows the account to you as an exception.

Northbrook Trading closes 2025

Northbrook Trading is the company in the skill's own example. This page follows that example. Other pages on this site use the same name with different facts, for example the financial statements page. Do not compare the figures across those pages.

Northbrook is an LLC with two members, Lena Hart (60%) and Omar Vance (40%). It keeps its books in QuickBooks Online, in US dollars, on an accrual basis, under US GAAP. Its year ends on 31 December. The skill's read-back names FY2026, but that year has not ended yet. So this example closes FY2025.

On the first run, on Tuesday 13 January 2026, the skill found one problem. An account with the name "Customer Deposits" had the type Other Income, with a credit of $4,000. Customer prepayments are a debt to the customer, so the name says liability. The skill listed it as an exception. It did not move it. The owner agreed, and posted a correction on 14 January. That correction changed the books, so the trial balance was not final yet.

The net income comparison did not catch this. QuickBooks' profit and loss report uses the same account type, so both figures included the $4,000. Only the review of names against types found it.

Operating expenses are 186,000 + 48,000 + 9,600 + 14,000 + 7,200 + 5,400 = 270,200. There is no income tax line. For US federal tax, the IRS treats an LLC with two or more members as a partnership by default, unless the LLC elects corporation treatment⁴.

QuickBooks had already closed the year

Some accounting systems close the profit and loss into retained earnings automatically when the new year starts. If a person also posts closing entries, the year's profit goes into equity two times. Accountants call this the double close.

Before it proposes any entry, the skill runs three tests:

• It reads the trial balance at Thursday 1 January 2026. Every income and expense account shows 0.
• It searches the journal entries near 31 December 2025. It finds no closing entry.
• It compares retained earnings at 1 January 2026, which is 208,900, with retained earnings plus the net income line at 31 December. That is 0 + 208,900 = 208,900, so the two agree.

The finding is "auto-closed by the platform". So the skill proposes no entry that closes sales or expenses.

Two entries that the automatic close does not make

The automatic close moves only income and expenses. In an LLC or a partnership, the net income goes to each member's capital account by that member's share. Each member's distributions close to that member's capital³. QuickBooks does not do this. So the skill proposes it, dated 31 December 2025.

The 60/40 split comes from the owner. The textbook says that partners share equally when the agreement says nothing³. The skill cannot read your agreement, so it never assumes equal shares. It asks you.

The books still balance at $591,400

After the close, the trial balance must show only permanent accounts, and the debits must equal the credits. A temporary account with a balance points to an error in the close². The skill builds this post-closing trial balance from the books and the two proposals. It can test it against QuickBooks only after a person posts P1 and P2.

The skill also tests that only temporary accounts moved. The assets and the debts do not change. The net income of 208,900 equals the increase in member capital from P1. The distributions of 100,000 equal the decrease from P2. This post-closing trial balance is the opening trial balance for 2026.

Last, the year must be locked in QuickBooks, so nobody can post to 2025 again. The skill cannot do this. It names the person who does it: Lena Hart, after the audit. The audit is not complete, so this is a preliminary close. If the audit changes figures, the skill runs the tests again.

Eleven items, in one message

The skill asks these first, in one short batch. It asks only for what it cannot already see.

1. Use MosoFin for this run, or upload the data yourself?
   MosoFin is the connection to your books. With it, the skill reads from there. Without it, you upload the files, and the tests are the same. It asks only if your account has the MosoFin tools.
2. Which company? For a group, which companies?
   Each company closes its own books. The skill never adds trial balances together before the close. On MosoFin, it lists your company files by name and asks.
3. When does your year end?
   The wrong year end closes the wrong twelve months. On MosoFin, it reads the date from your profile, then reads it back to you to confirm.
4. What type of business: corporation, partnership, LLC, sole proprietor or nonprofit?
   The entry for dividends, distributions or draws is different for each type. It suggests a type from your equity account names, and you confirm it.
5. For a partnership or LLC: how do the members share the profit, and does each member have a capital account?
   The year's income goes to each member's capital account. The skill requires this answer for those types. It never assumes equal shares.
6. Which reporting rules: US GAAP, IFRS, local rules or other?
   The rules change how some items outside net income close. It never chooses for you.
7. Is this the final trial balance, with all adjustments posted?
   The close uses the final figures, after depreciation, accruals, prepaid amounts and the tax provision¹. It flags an expected entry that is missing, but you confirm the full list.
8. Does your system close the year automatically?
   This answer prevents the double close. On MosoFin, the skill tests it, then confirms the result with you.
9. Is the audit complete?
   This decides between a preliminary close and a final close. If the audit later changes figures, the tests must run again.
10. Do you close in two steps, straight to retained earnings, or in four steps, through an Income Summary account?
    Both give the same result. The same method each year matters more than the choice. It looks at what you used before and suggests that.
11. Do you report on a cash basis or an accrual basis?
    Net income is different on each basis. The entries must agree with your statements and your tax return. The skill requires this answer.

Then it reads the plan back and waits for your yes. For Northbrook, with the year moved back to 2025:

"Closing FY2025 (year ended 31 December 2025) for Northbrook Trading, an LLC with capital kept per member, using the two-step method, with the books read from your Mosofin connection. The audit is not yet complete, so this is a preliminary close. I will first test whether the system has already closed the year. Shall I go ahead?"

Connect once, or upload the trial balances

Northbrook also uploaded its 2024 tax return schedules. Opening capital of 210,000 + 140,000 = 350,000 agrees with them. A difference would stop the run, because it means that the prior year changed after its report.

Eight sheets, from the trial balance to the coverage

It asks whether you want an Excel file before it makes one. For Northbrook, the file is Closing_Entries_TB_FY2025_Northbrook Trading.xlsx. If you say no, you get the same sheets as tables in the chat. After the results, it offers to save your settings: business type, closing method, the automatic close, exceptions and the person who locks the year. It never saves balances, net income or trial balances.

Northbrook's owner asked: "Post P1 and P2, and lock 2025 for me." The skill refused. It never writes, and it cannot lock a year. The coverage sheet shows the lock as manual, with Lena Hart as its owner.

Six terms, in plain English

Trial balance

A list of every account with its balance at one date. The debits must equal the credits.

Temporary account

An account that measures one year, for example sales or rent. It goes back to zero at the year end¹.

Permanent account

An asset, a debt or equity. Its balance carries into the new year¹.

Closing entry

A journal entry that moves a temporary balance into equity.

Post-closing trial balance

The trial balance after the close. It shows only permanent accounts².

Double close

The system closes the year, and a person closes it again. Equity is then wrong by the full year's profit. This is the skill's term.

Where the facts on this page come from

The sources are three sections of an accounting textbook and an IRS page. We found each one on 28 October 2026 in search results. We did not open the pages, so follow each link for today's wording. What the skill does comes from the skill's own files.

1. OpenStax: Principles of Accounting, Volume 1, 5.1 Describe and Prepare Closing Entries for a BusinessClosing entries set the temporary accounts back to zero, so each period starts fresh. Permanent accounts carry their balances forward. The close starts from the adjusted trial balance.
2. OpenStax: Principles of Accounting, Volume 1, 5.2 Prepare a Post-Closing Trial BalanceThe post-closing trial balance confirms that debits equal credits and that only permanent accounts have balances. A temporary account with a balance points to an error in the close.
3. OpenStax: Principles of Accounting, Volume 1, 15.3 Compute and Allocate Partners' Share of Income and LossNet income goes to each partner's capital account by share. Each partner's drawing account closes to that partner's capital. If the agreement says nothing, partners share equally.
4. IRS: LLC filing as a corporation or partnershipFor US federal tax, an LLC with two or more members is a partnership, unless the LLC elects corporation treatment. This is a US rule.

No outside authority backs the closed-year test or its three states. The same is true for the decision on account type, the eight sheets and the rule that the skill never locks a year. They are the skill's own rules. We made up every figure in the example.