I am trying to fill out an 1120S schedule L form. In my corporate book's balance sheet, under capital, there is a line that is "net income". This is added to the other liabilities and capital to balance out with the total assets. These balance. On the schedule L, it has sections for assets (no problem, this works fine), and then liabilities and shareholder's equity. There is a place for everything in my balance sheet EXCEPT for net income. If I leave net income out, lines 15 (total assets) and 27 (total liabilities and shareholders' equity) don't balance. How do I get these two lines to balance?
Optional Information: Lompoc, CaliforniaAlready Tried: Called IRS, read everything I could find, talked to 3 tax professionals. It seems like a simple question!
The net income is part of the retained earnings on the balance Sheet.
Let me know if you have any questions.
CPA, MBA, Over 10 yrs of experience in tax planning and business consulting..
Reply to Renu V's Post: Yes, I know that. But my problem is figuring out how to baXXXXX XXXXXnes 15 and 27.
If all your assets are correct and you have included your net income after all adjustments on Line 24 than your Line 15 and Line 27 should balance. I would suggest you to complete sch M-2 below the Sch L and transfer the balance from line 8 on M-2 to Line 24 on Sch L.
Let me know if you have any question. Bonus and Feedback will be highly appreciated!!!
Please note: This advice is provided with the understanding that all the relevant facts have been provided by you. Any change in facts might affect the advice given and hence may not be relied on in such cases.
My accounting software (Peachtree) has in the balance sheet:
cash in bank $6000.00
Accounts receivable $22,000
Total assets: $245,000.00
Liabilities and capital
accounts payable 11,000
Sales Tax payable 10,000
accrued payroll $4,000
Long term liabilities
loans payable $150,000
common stock $12,000
retained earnings $57,000
net income $12,000
Total liabilities and capital $245,000
(I rounded so they don't add correctly, but you get the idea.)
Form L takes all the entries EXCEPT net income. Are you suggesting adding net income to retained earnings for the tax form? Then schedule M2 line 6 won't balance with schedule L line 24 (retained earnings).
What amount are you showing on Sch M2
can you list the entries from M2
Reply to Renu V's Post: 1 balance at beg Tax Year 46,167
2 ordinary income 10,649
3 other additions 0
4 loss 0
5 other reductions 1,218
6 combine 1 - 5 55,598
7 distributions 0
8 balance 55,598
nothing in the other adjustments columns
Line 8 on M2 should match your retained earnings plus net income. If it does not than there is an error.
From limited information, it is difficult for me to point it out.
Are you saying line 8 of M2 and line 24 of L are supposed to be equal to retained earnings plus net income? (Are there two different definitions for retained earnings?)Would it be easier to attach a copy of the balance sheet and tax page in question? I'm still not understanding how to put in the info. (Is there a way to attach a file? or email or fax it?)
Yes, Line 8 in most cases shouls match Line 24 od Sch L
You can email the file to email@example.com and ask them to forward to me.
I emailed them to be forwarded. I sent the full balance sheet & income statement and the 1120s pages related to the balance sheet so you would have everything, but it's the balance sheet where I have the issue.
I will let you know the answer.....once I get the forwarded statements from you.
Thanks. If you need me to increase the payment just tell me how. To me it seemed like a simple question of "where does this go on the tax form?" but I understand if it takes more time that you expected.
I have not received your files yet.
Btw, what was the amount of Line 24 on your last years form 1120S
It was $50,070.I'll put the files where you can grab them: http://www.imagenhome.com/x.pdf and http://www.imagenhome.com/y.pdf -- it's probably easier. Let me know when you got them so I can delete them from there.
Btw, I have reviewed your complete tax return and financials and few things that I have noted-
Last year your retained earnings on Balance Sheet, Sch L was $46,167 but your Balance sheet as per financial statement shows the retained earnings as $57,054. So there is some adjustment or some changes that have affected the balance. This difference needs to be figured out. Normally the closing retained earnings balance on the Sch L should match with the opening retained earnings(as per financials) balance for next year
On the tax return- expenses side- You have meals and entertainment recorded twice as Travel ($2,435) and meals (50% at $1218). If you delete the figures from travel(since travel expense is recorded separately under the itemized listing)- Your profit will on Sch M-1 will match your profit and loss account.
Once you figure out the reason for the difference in retained earnings your balance sheet will balance and also Line 24 on Sch L will tie to Line 8 on Sch M2.
Okay, I see now. Thanks so much!
You are welcome!