Originally Posted by lwdee
Adding clarification...trying to find the answer within IRS rules. If there are none, then I'm assuming one must improvise to make end figures match end-of-year bank balances per statements.
When a prior tax preparer has filed returns with incorrect balances on the balance sheet, how does one correct that error when filing the 2015 return? =========>>I guess one of the most common accounting errors that affects a balance sheet is the incorrect classification of assets and liabilities;sometimes it is not easy/simple work to balance a BS due to the fact that the creator of it must backtrack in order to find out where the mistake came from or incorrect information. Also, accounting errors of omission occur when data are not recorded, resulting in inaccurate information being presented on your B/S. If the B/S, you're working on does not balance, this should be a red flag that there is likely a problem with one or more entries. Even a small discrepancy can occur as a result of several errors that offset each other. Or B/S are often affected by mundane data entry errors. These errors occur when the information contained within financial documents is incorrectly entered into financial databases;howver, one of the most common accounting errors that affects a balance sheet is the incorrect classification of assets and liabilities. So, you technically need to gather the general ledger that contains all the transactions that occur. It keeps track of all transactions and balances by posting entries to various accounts when transactions occur. And also you need to review the B/S. The total amounts of both of the categories, I mean assets and liaiblities plus owner’s equity (The owners’ equity account includes the amounts that the owners of the company own. This includes common stock, retained earnings, preferred stock, and paid-in capital accounts.)
are added up and placed at the bottom of this column. This amount should equal the total amount of assets from the bottom left-hand side. You also need to review the assets and liabilities(Liabilities are also divided into current liabilities and long-term liabilities. Current liabilities are liabilities that are expected to be satisfied within one year, and long-term liabilities are liabilities that will take longer than one year to satisfy.)
and equities by looking through the general ledger, and then study each asset and liability and equity and its amount to verify the amount listed in the general ledger .If an amount was transferred to the statement incorrectly, the balance sheet will be incorrect. When you find any discrepancies, you need to change the amounts listed on the balance sheet. And then finally you need to add up columns. Re-add each column and verify that the total assets are equal to the total amount of liabilities and equities. To put together a balance sheet, you’ll obviously need all of the financial data from your different trial balances.Finally, to close the books, you should transfer all income statement activity to equity. Your B/S different from the income statement in that it is a snapshot on any given day, whereas the income statement spans a time period.
You can check it with this vod; https://www.youtube.com/watch?v=hhKO6MRvk_c
Adding clarification...trying to find the answer within IRS rules. If there are none, then I'm assuming one must improvise to make end figures match end-of-year bank balances per statements.=========>>In my opinion, in reality, on biz returns, they usually carry/ submit incorrect B/S ,i.e., incorrect Sch L of 1120s/1065s as they can not correct errors in B/S due to many reasons; one of them is lack of reliable info or etc.. In general, they can be legitimate mistakes or attempts to conceal theft and fraud. Accounting errors are often unavoidable due to the large volume of financial information required to create balance sheets. While it is difficult to prevent errors, you can take steps to find mistakes before they have a chance to create long-term problems. you can create digital copies of all financial documents by scanning them so they can be quickly reviewed if a problem arises. Additionally, you can manually reconcile the financial information contained within a B/S with the original financial documents to ensure the data are accurate.Basically, the best way to learn how to do your B/S is to just practice filling one out a few times. Once you know where each account goes and you also understand why it goes there, it will be a lot easier to fill out a balance sheet whenever you need to. I guess you may need some help from a bookkeeper n your local area.