Cash at $0 on Balance Sheet, Balance sheet out of balance by $33,980, which was used to pay off previous business credit card debt

[jonpl]

Good afternoon,

I'm working on my 1120S, and running into a problem with my balance sheet which, as the title says, shows that I am off by $33,980. I do not currently have any cash in the company because I used all of the funds to pay off credit card debt from previous years. I haven't been able to figure out a way to balance the balance sheet, short of just reporting that I have $33,980 cash on hand (which I don't). My company hasn't really made much money in the past few years, and this is the first one (2024) where I have to fill out the balance sheet. I didn't have anything previously reported as far as short-term liabilities, and I just can't figure out what to do to balance the sheet. Any ideas? Thank you so much to anyone who can have mercy on me and help to figure this one out. 

[ThomasM125 · Accepted solution]

It sounds like you had the credit card payable from the previous year, so you could enter that in the previous year balance sheet and then enter a negative offset to retained earnings. That would lower your retained earnings balance in the current year which would bring you into balance. If that means your current year retained earnings is wrong, you would have to enter other similar entries in the prior year balance sheet to arrive at the correct retained earnings balance in the current year balance sheet.

[jonpl]

Thank you for the response! When you say the previous year.. are you referring to a balance sheet that is part of this year's taxes? I understand about the negative offset, and I'll play around with that, but can modify last year's balance sheet without doing anything to my taxes? Or is that something that's somewhere in Turbo Tax that I can change? As you can see, I have zero experience with the balance sheets. This is the first year my company has reported enough income to have to fill it out. 

[ThomasM125]

Yes, you can modify the prior year balance sheet without affecting the income reported on this year's tax return. I'm referring to schedule L. The left column is begging of tax year and the right is ending. You can make entries directly on that form and it won't affect your current year tax return income in any way. 

[jonpl]

I spent like 3 hours arguing with Grok this morning until I realized that LLMs do not have the reasoning capacity to help with taxes. Thank you Thomas!!!