Theft on Balance Sheet

by Gabe
(San Jose, CA, USA)

Theft on Balance Sheet

Theft on Balance Sheet

Where does theft fall into the equation on the balance sheet?

A business, starting with $102K in assets and $102K in liabilities, takes on a $50K loan, hires a $5K consultant, and negotiates a $10K license of its software. Then one of the directors leaves the country with $50K.

If we just add the cash in ($50K+$10K-$5K-$50K), we get $5K added to the assets, right? So $107K in assets.

But the $50K loan means there are $152K in liabilities.

How would we balance the sheet??

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Dec 08, 2017
Balance Sheet Theft Write Off
by: Stephanie

Thank you for your inquiry regarding how to account for theft on the Balance Sheet. If all legal means have been used to try to get payment back for the loan, you can write off the loan as an uncollectible debt.

You would do this by crediting cash account for the missing $50K and debiting Owner's Draw. If you are able to deduct the theft on the tax return, you can then credit owner's draw and debit Bad Debt Expense under Other expenses.

Or for your situation in order to simply balance the sheet, you would deduct the $50K from Owner's Equity which would then give you the $107K in Liabilities + Owner's Equity.

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