What Does Condensing the QuickBooks Company Files Do?

By Stephen L. Nelson

You may have noticed the Condense command for the QuickBooks data file. What does it do? Good question. The QuickBooks file condense process does two things:

  • The QuickBooks Condense command creates a permanent copy of the QuickBooks data file. (This copy is called an archival copy of the file.) An archival copy of the company file amounts to a snapshot of the company file as it exists at a particular point in time. If somebody later has a question — perhaps your accountant, or a federal or state auditor — you can use the archival copy of the data file to show what the company file looked like at a particular point in time.
  • The file condense process makes the data file smaller by summarizing many old closed, detailed transactions that use monster journal entries.

Because this condensing and archiving can be a little bit confusing, let’squickly summarize exactly what happens when you condense the QuickBooks company file. Here’s what QuickBooks typically does during the process:

  • Saves an archive copy of your company files: When you condense the QuickBooks company file, QuickBooks saves an archival copy of that file.
  • Removes closed transactions: As part of the condense process, QuickBooks gives you the opportunity to remove old, closed transactions from the current, working version of the QuickBooks company file. Remember that archiving creates an archival copy of the QuickBooks company file. You still have the working version of the QuickBooks company file, however, and it’s this current, working version of the QuickBooks company file that gets cleaned up, or condensed, by the removal of old, closed transactions.

Closed transactions are transactions that QuickBooks no longer needs to track in detail. An old customer invoice — after it’s been paid — is a closed transaction. An old check written to some vendor — after it’s cleared the bank — is a closed transaction.

  • Summarizes closed transactions: Because the old, closed transactions are removed from the QuickBooks data file, condensing typically creates summary monthly journal entries for the old, closed transactions and places these summary transactions in the current, working version of the QuickBooks data file. These summary monthly journal entries allow you to continue to prepare monthly financial statements. Even though archiving removes all the old, closed transactions from, say, January 2011, you can still produce financial statements for January 2011 in 2017. To produce monthly financial statements for January 2011, QuickBooks uses the summary monthly journal entries.
  • Clears the audit trail: QuickBooks maintains an audit trail showing who has entered what transactions. One almost-hidden effect of the cleanup of the QuickBooks data files concerns the audit trail. If you clean up a company file and indicate that the company file should be condensed, QuickBooks clears the audit trail before the “removed closed transactions on or before” date. In other words, for the period of time in which QuickBooks removes old, closed transactions, it also removes the audit trail of those transactions.

The condense file process typically means creating a copy of the QuickBooks data file that you put away someplace and then creating a scaled-down version of the working company file. The command that you use to condense the QuickBooks company file, however, also allows you to create almost-empty company files. Most people never need to use this option.

There is maybe only one category of QuickBooks users who may want to create almost-empty company files: CPAs and consultants (who want to reuse a company file for another business unit or client) may want to use this command to create company data files that have many of the lists set up already.