Form 1065 Sch L Balance Sheet Issues

7 replies
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I am not able to get Sch L, Balance Sheet to get in balance. I have assets but no liabilities.

I have one depreciable asset.

For Ex: Purchase Price $50,000.

Accum Depr ($25,000)

Net $25000.

Cash 2000.

No liabilities, no payables, and paid out cash distributions to member so Capital account is zero.

How do I balance this??

THANKS

Anonymous_

Level 15

Something is awry somewhere.

Assets should equal Liabilities and Capital (it is unclear as to why your Partners' capital accounts is zero).

flipzAuthor

Level 2

If during the year we made, let's say, $10,000, and distributed the earnings in December would that not make the capital account 0?

Thank you!

Anonymous_

Level 15

@flipz wrote:

If during the year we made, let's say, $10,000, and distributed the earnings in December would that not make the capital account 0?

That would be a wash for the current year. However, you should have started with a higher figure and, as @sammyls1525665 mentioned, adding the figure to your capital account should result in your Schedule being in balance.

sammyls1525665

Level 2

ENTER $27000 IN THE PARTNERS CAPITAL ACCOUNT. YOU WILL THEN BE IN BALANCE.

DawnC

Employee Tax Expert

Here is an example of how your profits (net income) and capital accounts interrelate - If you are one of two 50/50 owners of XYZ & Co. LLC and you contribute $10,000 to help start the LLC, your initial capital account balance is $10,000. If you take a $2,000 owner draw, your capital account balance decreases to $8,000. If at the end of the first fiscal year, the LLC has $10,000 in profit, the LLC adds $5,000 to your capital account to reflect your share of the profits, and your capital account balance is $13,000.

When you contribute assets (cash, equip, etc) to the business, your capital account goes up and when you distribute or draw assets, the capital account decreases. The accounting equation, Assets = Liabilities + Capital means that the total assets of the business are always equal to the total liabilities plus the owners' equity of the business.

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flipzAuthor

Level 2

Hi. Your answer is super. I really appreciate it and I do understand the accounting equation. For some reason I am just having trouble getting my head wrapped around the Capital account. Just when I think I understand the relationship between earnings, distributions, and the capital account, my process seems wrong. I started an LLC 3 years ago and if I may ask one more time with more a little more detail, maybe you could supply me with an answer. If you pass on this I will completely understand. The sad thing is I know this should be super easy.

(these won't be actually numbers, but in the ballpark. Also it's husband and wife so I will refer to it as me).

We have personally not contributed any personal assets.

Year 1 had cash earnings of $9500/Ordinary income of $9400/Owners Cap $9400

Year 2 we distributed the Owners Cap $9400(from year 1)/ Cash Earnings $25000/Ord Income $24000/However we placed an asset in to service and with the Sec 179 and Depr it brought our capital acct to 0./

Year 3 Cash Earnings $39000/Owners Cap $28000. Since we knew what the Owners Cap was we distributed the cash to us in Dec of $28000. So....shouldn't the owners cap account reflect a zero balance?

Thank you for your input