Can the P&L be off but the balance sheet be correct

[AZ-Tax]

Can a P&L that only reported 1/3 of the current depreciation thus be off on the Net Income, still have a balance sheet that matches Schedule L?

[Uncle Sam]

NOPE

Try Accounting 101.

[JohnH]

Not in normal double-entry accounting. Has the depreciation been split and 2/3 of it is showing up somewhere else on the P&L? COGS/inventory, an overhead category, Sec 263 adjustment, etc?

You'll need to drill down to the actual depreciation entry, probably in the General Journal. There might also be a prior-period adjustment that somebody closed out to retained earnings, or just a wrong entry somewhere else. There's no end to the number of errors that can be generated by a creative person who doesn't understand accounting. What version of Quickbooks are they using?

When all else fails, pull out a yellow sheet of paper, set up your T accounts, and work it through manually. This always points you in the right direction, even if it doesn't identify the problem precisely.

[AZ-Tax]

Actually its about 1/4 of the total depreciation.

There is only one entry for "Depreciation expense" and its about 18% ($3700) of the total current $20000 depreciation. Dont see any other entries that would even come close to being depreciation.

[JohnH]

So what makes up the $20,000 entry? There has to be some detail somewhere - numbers cannot just appear out of nowhere in a double-entry system. What's the source of the numbers - are we talking about a double entry system or is this coming from someone's yellow legal pad? (Your info is a little short on detail in relation to the questions you're asking.)

[Uncle Sam]

P & L off

Could it be possible there's Sec 179 depreciation that can't be deducted because of threshhold limitations?

[taxxcpa]

Balance Sheets

NOPE

Try Accounting 101.

I agree. However the tax return and the books can have variances in the amount of depreciation deducted. The tax return's balance sheet should agree with the books and the difference explained as a reason for the variance.

[Davc]

There's no end to the number of errors that can be generated by a creative person who doesn't understand accounting. What version of Quickbooks are they using?

1. It's possible to screw up a set of books using a product that didn't come from intuit.

2. Are you implying the individual doing the books wasn't standing close enough to the computer when they waved the box to transform themselves into an accountant?

[JohnH]

1. It's possible to screw up a set of books using a product that didn't come from intuit.

2. Are you implying the individual doing the books wasn't standing close enough to the computer when they waved the box to transform themselves into an accountant?

1) I agree, there are several products out there enabling people to produce unbelievable messes. Personally I like & prefer Quickbooks; I even recommend it. But it's especially dangerous in the wrong hands - some people are exceptionally talented in this area. I tell them NOT to buy it if they aren't willing to invest $500 or so in training, but most of them prefer to pay me many times more than that just to straighten out their messes year after year after year. That's what makes QB almost as good a revenue generator for accountants as it is for Intuit.

2) Yep, I think that's a good description - mind if I use it?.

[outwest]

Or, as I heard it put..

nothing is foolproof to a sufficiently talented fool....

[luke]

maybe

it is "amortization" of intangible asset - goodwill, covenant not to compete?
(some software almost "hides" amortization deduction)?

[Davc]

1)

2) Yep, I think that's a good description - mind if I use it?.

Not at all. It's just a clarification of what Intuit has always implied in their commercials.