Adding To The Balance Sheet

by Betsy
(United States)

Adding To The Balance Sheet

Adding To The Balance Sheet

How do you Account for the occurrence of business expenses when the balance sheet almost tallies changes to its pending assets in expected accruals and existing cash flows beyond the debt margin at that time?

How do they add to the balance sheet, as a separate liabilities book or as a rider on the total for retained earnings balanced from the total for overall assets minus liabilities?

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Dec 10, 2017
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starstarstarstarstar 		Net Income On Balance Sheet
by: Anonymous

The business expenses from accrual system of accounting would show up under the equity section through the flow through of ending year net income. This usually is shown in the equity section as a separate line item above or below retained earnings.

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Balance Sheet Account Reconciliations

by Vote for Pedro
(Queensland)

Balance Sheet Account Reconciliations

Balance Sheet Account Reconciliations

Very simply, how does one do reconciliations of balance sheet accounts?

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Dec 10, 2017
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starstarstarstarstar 		Reconciling The Balance Sheet
by: Stephanie

Reconciliation's of balance sheet accounts are typically done on a monthly basis.

The reconciliation is accomplished by obtaining a monthly account statement showing the ending balance at the end of the month and matching this balance to what is showing on the balance sheet on the same date.

Any difference in the amounts should then be able to be accounted for through listing all of the outstanding deposits and withdrawals.

Thank you for your question about Balance Sheet Accounts Reconciliation.

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Balance Sheet Account Withdrawals

Balance Sheet Account Withdrawals

Balance Sheet Account Withdrawals

Please state the balance sheet effects of each of the following and provide an explanation:

The owner withdraws R160 from the firm's bank account for his own use.

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Dec 10, 2017
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starstarstarstarstar 		Owner Withdrawals On Balance Sheet
by: Stephanie

When the owner withdraws R160 from the firm's bank account for his own use, he will credit the bank account and debit the owner's draw account. This will effectively reduce the amount of current assets and owner's equity by R160.

For example:

The accounting equation is Assets = Liabilities + owner's equity. If before the withdrawal Assets is equal to 10160, Liabilities equal to 2000, and Owner's Equity equal to 8160 then you would have the equation 10160 = 2000 + 8160.

But after the withdrawal Assets is equal to 10000, Liabilities equal to 2000, and Owner's Equity equal to 8000 and you would have the equation 10000 = 2000 + 8000 showing the asset and owner's equity accounts having been reduced.

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Balance Sheet And Income Statement Differences

by Tebohot
(Pretoria)

Balance Sheet And Income Statement Difference

Balance Sheet And Income Statement Difference

What is the difference between balance sheet items and income statement items?

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Aug 25, 2018
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starstarstarstarstar 		Profit & Loss vs Balance Sheet
by: Stephanie

Thank You for your questions about what the differences are between a balance sheet and a profit and loss statement.

The income statement shows the overall profit and loss of your business during a specific period of time, usually daily, weekly, monthly, quarterly and annually.

It will include business transactions of the gross sales income you bring in and the purchases you spend to give you a net income.

The balance sheet shows the assets, liabilities and equity you have in the business. It will show what your balances are on any given date to match the same date as the profit and loss statement.

It will include things such as your bank accounts, machinery & equipment, business loans, and money invested into the business.

Save money on Financial Statement (Personal)

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Balance Sheet Doesn't Balance

by Lona
(Michigan)

Balance Sheet Doesn't Balance

Balance Sheet Doesn't Balance

Is there anything in particular you can advice me to check when assets don't equal liabilities? I would appreciate it, thank you.

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Dec 10, 2017
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starstarstarstarstar 		Find Balance Sheet Error
by: Stephanie

Thank you for your question regarding what to do when your balance sheet doesn't balance. This could be due to legitimate bookkeeping errors or attempts at hiding theft or fraud.

The first thing I recommend is making sure your bank accounts have been reconciled year to date and that the reconciled amount is the same amount that is showing on the Balance Sheet. If not, you will need to find the bank transaction error.

Another very common bookkeeping error that can affect the balance sheet is the incorrect categorization of your assets and liabilities. Make sure that your asset and liability entries were debited and credited correctly. Assets should have a normal Debit balance, while liabilities should have a normal Credit balance.

Also, make sure there are no errors of omission such as cash expenses not being reported or inventory and accumulated depreciation adjustments not being made.

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Balance Sheet Shares

by Connie
(Alberta)

Balance Sheet Shares

Balance Sheet Shares

When preparing a balance sheet and you have public shares to add to your assets, do you list them by the book value or the market value at your year end?

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Jun 07, 2010
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starstarstarstarstar 		ASPE and IFRS
by: Bookkeeping Essentials, Canada

Hi Connie,

Right now Canadian GAAP is in a state of change. Effective January 1, 2011, if you are a small business, you will have the choice of following ASPE or IFRS standards. Both will be considered Canadian GAAP.

I have commented on some of the changes throughout my website. Publicly traded stock will be treated differently than existing GAAP.

You can also find information on which standard you should choose to follow at the very end of this page if you need to dig deeper and/or want more information.

Hope this helps.

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Home Value On Balance Sheet

Home Value On Balance Sheet

Home Value On Balance Sheet

Should I show the value of my home on the balance sheet minus the mortgage amount? Or should I not show it or list the home as an asset until the mortgage is paid in full?

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Dec 10, 2017
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starstarstarstarstar 		Balance Sheet Home Value
by: Stephanie

Thank you for your questions about whether or not you should show the value of your home on the balance sheet or if you should wait until it is sold.

It is really up to you, but if you show the asset value along with the liability on the balance sheet from the start and add and subtract from it throughout the years as appropriate, it will make it much easier when it comes time to sell and figure out your gain or loss on the sale.

You would show the value of the home purchase on the balance sheet as follows:

DEBIT Home Asset (total cost - land value)
DEBIT Land Asset (land value)
DEBIT Owner's Contribution (for cash paid)
CREDIT Mortgage Liability (Loan cost)

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How To Make Balance Sheet

by Kimberly Echavia
(Philippines)

How To Make Balance Sheet

How To Make Balance Sheet

I am confused as to how to make a balance sheet. Will you please provide more information on what I should do?

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Dec 10, 2017
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starstarstarstarstar 		How To Prepare Balance Sheet
by: Stephanie

Thank you for your balance sheet question about how to make a balance sheet. The balance sheet must balance via the equation Assets = Liabilities + Owner's Equity and is made up of these three sections.

Under assets you will list all the resources that are owned, such as bank accounts, assets like furniture, equipment, vehicles and inventory.

The liabilities will list all the debts of the company such as Accounts Payable and loans.

While Owner's Equity will list the contributions and distributions of owners as well as the past earnings.

To start, make a header that says:

Balance Sheet
Name of Company
Date of Balance Sheet

Next list all the assets and total them together and double foot the total. Then list all of the liabilities and total them together, and list all of the Owner's Equity accounts and total those together.

Finally, add the total liabilities and owner's equity numbers together and double foot it. Both the double footed totals should match which means your balance sheet is in balance.

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Income Tax Payment on Balance Sheet

Income Tax Payment on Balance Sheet

Income Tax Payment on Balance Sheet

Why does my income tax payment not show on my end of year financial statements from my accountant?

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Dec 10, 2017
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starstarstarstarstar 		Income Taxes Paid Shown On Balance Sheet
by: Stephanie

If you are self-employed your income tax payment will show on the Balance Sheet as an owner's draw.

This is because you file your business return as a Schedule C on your federal income tax return which you are personally responsibly for.

Therefore, any payments made are considered a personal expense rather than a business expense.

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Is Accounting Equation an Ideal or Reality?

by SteveJ
(UK)

Is B/S Accounting Equation an Ideal or Reality?

Is B/S Accounting Equation an Ideal or Reality?

I have a situation where my business went through a reasonable period. It has recently not been doing well.

In the good times I bought assets which went on the book and have gradually depreciated.

I've never owed money (except chump-change on credit cards; paid off monthly) and never paid myself money I didn't have. The bank balance has always been in the black.

Yet the only way I can get things to balance on returns to state organizations is to effectively issue shares to myself which allows money to come in.

Part of this feels like I'm paying for asset depreciation - which seems stupid as I have already paid for the assets once in reality (work tools in this case).

To me the equation seems totally artificial and not connected to my reality.

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Dec 10, 2017
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starstarstarstarstar 		Balance Sheet Accounting Equation Reality
by: Stephanie

Thank you for your question about whether or not the balance sheet accounting equation is an ideal or a reality and sharing your experience.

The balance sheet is supposed to be a realistic summary of your companies financial status showing all of your assets, liabilities and equity at a particular point in time.

It lets investors have a better idea of what a company owns versus owes in addition to how much has been invested or taken out by investors.

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LLC Partner Payments on Balance Sheet

by Camille
(Texas)

LLC Partner Payments on Balance Sheet

LLC Partner Payments on Balance Sheet

Where do you show paying LLC partners out of the profits on the balance sheet? We do not have a salary for the partners. We just divide up the profits once expenses are accounted for. Does this show on the Balance Sheet?

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Dec 08, 2017
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starstarstarstarstar 		Partner Distributions on Balance Sheet
by: Stephanie

Thank you for your question regarding where you should show the payments made to LLC partners on the Balance Sheet. You are correct in that when you divide up the profits and pay them out, it should be accounted for on the balance sheet.

This is done be categorizing the payment to Shareholders Distributions (Owner's Equity). You can also setup subcategories under each individual partners name to track them separately, which is highly recommended as it will need to be known at tax time.

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Prepaid Utility Deposit On Balance Sheet

Prepaid Utility Deposit On Balance Sheet

Prepaid Utility Deposit On Balance Sheet

Where is a prepaid expense deposit to open a utility account listed on the balance sheet?

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Dec 10, 2017
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starstarstarstarstar 		Prepaid Down Payment on Balance Sheet
by: Stephanie

Thank you for your question about where a prepaid deposit for a utility expense account should be listed on the balance sheet.

You should list the transaction as:

DEBIT Down Payments
CREDIT Cash Bank Asset Account

CREDIT Down Payments
CREDIT Utility Accounts Payable

By doing this, you are turning as asset (the down payment) into an expense when you get and pay the vendor utility bill.

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School Balance Sheet Assignment

by Hazelann
(Grenada)

School Balance Sheet Assignment

School Balance Sheet Assignment

I have a school balance sheet assignment that I need help with. I would like to know why my balance sheet is not balancing.

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Dec 08, 2017
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starstarstarstarstar 		Balance Sheet Not Balancing
by: Stephanie

Thank you for asking your question about your school balance sheet assignment. As you are aware, the balance sheet should always balance via the equation assets = liabilities + owner's equity.

If the balance sheet is not balancing, you will need to review each individual piece of the equation to make sure everything is showing up and accounted for correctly.

With assets, there could be a problem with the bank balance if monthly reconciliations have not been done, or with A/R if payments have not been applied correctly, or with Fixed Assets that have not been depreciated correctly, etc..

With liabilities, the A/P could have problems with posting of payments, or credit cards need to be reconciled, or loans principal and interest need to be reconciled.

With Equity, beginning owner's equity needs to reviewed and accounted for, owner's contributions and withdrawals, and closing entries could be issues.

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Suspended Loss On Balance Sheet

by Christine
(Portland OR)

Suspended Losses on Balance Sheet

Suspended Losses on Balance Sheet

Where on the balance sheet should a suspended loss be posted and shown?

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Dec 10, 2017
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starstarstarstarstar 		Balance Sheet Suspended Losses
by: Stephanie

Thank you for your question about where on the balance sheet should a suspended loss be shown.

Suspended losses such as a NOL (Net Operating Loss) Carryover, are usually posted on the balance sheet under deferred tax assets (DTA).

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Tax Return To Enter Balance Sheet

by Julia
(USA)

Tax Return To Enter Balance Sheet

Tax Return To Enter Balance Sheet

Hi, I have a question. I want to do bookkeeping for small businesses. If a company is s-prop and I need to do their books, do I need the tax return to enter information on the balance sheet? Or is it only for corporations? Thank you for your help.

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Apr 08, 2011
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starstarstarstarstar 		Matching Balance Sheet To Tax Return
by: Stephanie

Hi Julia,

Good question, thanks for asking.

It is good practice to make sure the balance sheet matches to the tax return at end of year for any type of business, including sole proprietor and partnerships as well as corporations and S-Corps.

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The Balance Sheet

by Rusi
(Janakpur, Nepal)

The Balance Sheet

The Balance Sheet

Why do liabilities equal to total assets on the balance sheet?

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Dec 08, 2017
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starstarstarstarstar 		Balance Sheet Equation
by: Stephanie

Thank you for your question about why do liabilities and owners equity equal to total assets on the balance sheet. The balance sheet equation of assets = liabilities + owner's equity is the foundation of double entry accounting.

It represents the relationship between all business transactions and basically shows that what is owned (assets) is purchased by either what it owes (liabilities) or by what it's owner's have invested (equity or capital).

This relationship is expressed in the form of the balance sheet equation and it must always remain mathematically in balance.

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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
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starstarstarstarstar 		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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