Balance Sheet

[marinel_98]

Hi, 

For my balance sheet it is not balancing. I also think the tax payer who filed our taxes last year did it incorrectly. 

My balance sheet is as follows:

This was the end of year for 2021

Cash $502,705

Less accumulated depreciation: $73,345

Total Assets: $576,050

Mortgages and Notes payable 1 year or more: $45,768

Other liabilities: $149,167

Additional paid in capital: $79,000

Retained Earnings: 313,632

Total Liabilities and shareholder's equity: $587,567

For 2022 I have:

Cash: $239,199

Assets: $60,926 - $7,775 (depreciation) 

Land: $7,000

Mortgages and Notes payable 1 year or more: $44,528

Other liabilities: $144,583

Additional paid in capital: ?

Retained Earnings: ?

[Anonymous_]

Did you transfer this in to TurboTax Business? I presume you are preparing an 1120-S, but more information is going to be needed.

For example, what happened to your total assets?

Also, are the figures you posted for 2022 beginning or ending figures?

[marinel_98]

Those are ending 2022 figures, and he marked 2 leased vehicles we had as assets.

[Anonymous_]

That is most likely the proper treatment on a financial statement for a capital lease.

[marinel_98]

Okay, and with a capital lease can I still put the vehicles expenses?

[Anonymous_]

The lease is on your balance sheet as an asset which does not mean you are unable to deduct expenses on the return.

[Rick19744]

A number of comments:

• Balance sheets are always the bane of taxpayers since the figures are more of less just input from the taxpayers books and records.
• Do you maintain your books and records using some type of software; Quickbooks, etc?
• There appears to be a significant drop in cash.  Does this make sense?
  • Were there distributions?
  • Doesn't appear that $$ were spent paying down debt or purchasing additional assets
• I don't see anything reflected for capital contributions.  Were there any?
• Are you satisfied with the additional paid-in capital figure?
• Keep in mind that your balance sheet will need to "roll" from the beginning of the year to the end of the year and this will need to be addressed in the Sch M-2 section.
• Are you satisfied with the end of the year (2022) figures you listed, except for the question marks?

[marinel_98]

- I use quickbooks to maintain our records.

- The cash difference in 2021 was entered wrong by the tax preparer, but the one for this year is accurate, there were distributions in total of $68,300 to the owners.

- There weren't any capital contributions. 

- Additional paid is also incorrect as there aren't stocks, it's just 2 owners which each have 50%

- I am satisfied with the 2022 end of year figures, everything is reconciled and matches all bank statements.

[RobertB4444]

So it looks as though your balance sheet issues are caused by the numbers from your 2021 return.  You need to correct those numbers to reflect reality and not what was entered in error.  You can try to adjust them in your 2022 return but you may have to file an amended 2021 return to get the correct numbers in there.

@marinel_98

[Rick19744]

Thanks for the follow-up response:

• I would not amend a tax return for an incorrect balance sheet.  This will only cause confusion at the IRS.  This assumes that the 2021 tax return (taxable income and K-1's) were correct.
• Are you saying that you never made any capital contributions?
• What entity type are you filing? S corp, c corp, or LLC filing form 1065?
• Based on your response, are you indicating that all end of the year amounts reflected in your initial question are correct?  And these amounts agree to your QuickBooks?

[marinel_98]

- Okay, taxable income and K-1's were correct

- No capital contributions were made, since business opened it has been same 2 owners 50/50, no stocks were sold or anything like that. They just receive salary and owners distribution throughout the year

- We file S-Corp, so we file 1120S

- The 2022 numbers do match my quickbooks and would be accurate 

[marinel_98]

The only thing is I would have to add 2 leased vehicles to assets, so that part will change.

[Rick19744]

2nd follow-up:

• The retained earnings on Sch L line 24 is essentially a "plug" if all other balance sheet amounts are correct.
• I wouldn't include the leased vehicles unless you are absolutely sure that the lease is a capital lease.
  • There are insufficient facts and a forum such as this is not suitable to make that determination.
  • This decision has a number of implications that affect your tax reporting.  I would make sure you consult with a tax professional who can make the appropriate decision.
• Based on the above, your retained earnings should then be $110,239.  This should result in line 15 being $299,350 and line 24 being the same amount; and of course I am referring to the end of the year balance sheet column.
• This has no impact on Sch M-2 (AAA) since that is tracking taxable income / loss, and distributions.  Based on your facts, the beginning of the year AAA  should be correct. 

[marinel_98]

Great thanks, and I will find out about the capitalized lease or not. 

[Rick19744]

You are welcome.