I need help with the balance sheet on the 1120s! I'm filing for a business that was closed last year, so the only assets left are cash. No liabilities.

[Linds_]

I'm confused where it's telling me the year's income is a liability, and can't figure out where to adjust it on the assets.  I hate accounting!!

[Anonymous_]

Can you describe the issue (i.e. include numbers) more precisely? 

I understand that you hate accounting but (a) you might not even be required to complete the balance sheet and (b) since cash is an asset, you need to balance that out on the liabilities/equity side.

[Linds_]

Ok, so it won't let me skip it because my sales are over $250k.  :( Unless there is a way around that?

My profit is only about $38k.  It's showing that as a liability, but I can't figure out where to balance it as an asset. 

Beginning bank balance: $9684

Ending bank balance: $0 because we closed the business, and cashed out.  Do I need to show what was there when we closed in October?

Retained Earnings: $38,382.

As far as I can see on this balance sheet, that's all it's asking for?  But where do Retained Earnings go as an asset??

Thank you so much!!

[Anonymous_]

Go through the Retained Earnings Reconciliation and check there.

Also, if you closed the business during the tax year, there was probably a distribution to shareholders you did not enter (which will reduce your RE).

[Linds_]

Ah!!  So that income should be reported as shareholders' earnings in the wages/deductions??

[Linds_]

Where would I put the beginning bank balance as a liability?  Some sort of accounts payable?  To shareholders' equity?

[Anonymous_]

Cash is not a liability, it is an asset. Your beginning balance would most likely be the ending balance from the prior tax year. Your ending balance would be zero if you closed the business and withdrew and distributed the cash to shareholders (or paid balances due to creditors).

[Linds_]

Ok.  Yes.  I understand that now.  So I have my beginning balance as an asset, but where do I balance the excess?  I have a little that would have been accounts payable to vendors at the end of the year.  The rest was just the money in the business' checking account.  Where would that go to balance out the cash as an asset?

[Linds_]

Would I just put it all as accounts payable?

[Anonymous_]

I am not sure I understand; you should have settled all accounts in the process of winding up the business.

[Linds_]

I mean the beginning bank balance for the year.  Last year we filed as a sole proprietor, so it didn't ask all these questions.  The money in the bank at the beginning of the year was just money in the bank.  Also, on that note, it's asking for last year's income to file.  Since it was technically a different business, I guess, as a sole proprietor, do I say $0?

[Anonymous_]

Frankly, that is what I would enter if the balance sheet would balance as a result.

[Linds_]

Ok.  Thank you so much!!

[Anonymous_ · Accepted solution]

No problem whatsoever, but I sincerely hope you are aware that the balance sheet is not more consequential as is the fact that your 1120-S is very late; it was due on March 16th and there could be penalties involved for late filing.

Good luck! 😊

[Linds_]

Yep.  I didn't realize it was only personal taxes that got the date extended.  Whoops.