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Ending balance sheet is out of balance on Form 1120

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Ending balance sheet is out of balance on Form 1120

Problem Description

If the ending balance sheet (Schedule L) is out of balance, please see the tips below.

Solution Description

Tips to resolve:

1. View the balance sheet on Form 1120, page 4 and determine which line or lines is incorrect or causing the balance sheet to be out of balance. Some lines are input / output and some the program automatically calculates unless an entry is made in the Data Section (located on the left side of the screen), Balance Sheet for that item.

2. The following are items automatically calculated by the program (Indicated by an "*" in the Balance Sheet Data Section):

Assets

*Inventories - Amount automatically flows from the Data Section of Income>Cost of Goods Sold.  If the amount is different from the cost of goods sold, enter the amount for the Balance Sheet in Ending - Inventories in the Balance Sheet Data Section.

* Prepaid Federal Tax - If the box is checked in Accrue Federal Tax (General Data Section>Miscellaneous Information), the program will adjust the prepaid federal income tax amount based on the actual tax calculated. In this case, an entry is required for the ending balance. Estimates do not automatically get included in this calculation and must be entered in the ending balance for prepaid tax.

* Prepaid State Tax - If the box is checked Accrue State Tax Option 1(General Data Section>Miscellaneous Information), the program will credit the ending balance of prepaid state tax up to the prepaid state tax entered and credits State Tax Payable by any tax remaining.

* Prepaid State Tax (cont.) - If the box is Accrue State Tax Option 2(General Data Section>Miscellaneous Information), the following the program will credit the ending balance of prepaid state tax up to the prepaid state tax entered and credits State Tax Payable by any tax remaining as well as make M-1 adjustments.

* Buildings and Other Depreciable Assets - The program will automatically add any assets placed in service in the current tax year in the Data Section Deductions>Depreciation to the amount entered in Beginning - Buildings and other depreciable assets. The program will also subtract any assets sold during the year to arrive at the End of Year balance.

* Less Accumulated Depreciation - The program automatically enters accumulated depreciation on the balance sheet from assets in Data Section Depreciation plus the amount entered for Beginning - Less Accumulated Depreciation and subtracts any depreciation from assets sold during the year to calculate accumulated depreciation at the end of the year.  The program will default to using federal tax depreciation in this calculation unless and entry is made in Current year book depreciation (Data Section of Balance Sheet>Balance Sheet Miscellaneous).

* Depleted Assets - The program automatically calculates the ending balance as follows: Beginning - Depletable assets plus current year change in depletable assets entered in Oil and Gas (Data Section of Income>Oil and Gas).

* Less Accumulated Depletion - The program bases its calculation on the entry in Current Year Book Depletion (Data Section of Balance Sheet>Balance Sheet Miscellaneous). If this field is left blank, the program uses federal tax depletion to calculate the ending balance of accumulated depletion.  The current year depletion calculated is added to Beginning - Less accumulated depletion to arrive at the ending amount.

* Intangible Assets - The program automatically calculates the ending balance as follows: Beginning - Intangible assets (Data Section of Balance Sheet>Balance Sheet Miscellaneous), plus current year change in intangible assets entered in Depreciation. For this calculation, an "intangible asset" entered in Depreciation  is defined as an asset placed in service during the current year having an entry of 97 in Method, an entry of Amortization in Category. * Accumulated Amortization - The program bases its calculation on the entry in Current Year Book Amortization (Data Section of Balance Sheet>Balance Sheet Miscellaneous). If this is left blank, the program uses federal tax amortization to calculate the ending balance of accumulated amortization.  The current year amortization is calculated is added to Beginning - Less accumulated amortization to arrive at the ending amount.

Liabilities

* Federal Tax Payable - If the box is checked Accrue Federal Tax (General>Miscellaneous Information), the program adjusts the entry made in Federal tax payable based on the outcome of the tax return. If not accruing federal income tax, the amount entered in Federal tax payable  carries to Schedule L and is not adjusted.

* State Tax Payable - If the box is Accrue State Option 1 (General>Miscellaneous Information) or Accrue State Option 2 (General>Miscellaneous Information), the program adjusts the entry made in Ending - State tax payable  based on outcome of the tax return. If not accruing state income tax, the amount entered in Ending - State tax payable carries to Schedule L, line 18 and is not adjusted.

* Ending Retained Earnings - This amount is calculated on the Schedule M-2 of Form 1120.  To override this calculation, enter the desired amount in Ending retained earnings (-1=none)[O] (Data Section of Balance Sheet>Balance Sheet Miscellaneous).

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